I've got a super-duper mega bitchin computer with an assload of ram, fast hard drives... the lot. Editing an avs file still gets lag.
Personally, I think that's the best way to go... as it has less steps to deal with, and you're likely to get the best quality that way. Normally however, I save the file to a high quality Mjpeg and edit that. The Mjpeg has
reasonable quality, and good space savings.. and edits extremely smoothly.
There's no magic codec or button for skill though.....