Beni,
No real loss in quality IF your produced mpeg is of the same quality that you plan to produce to again. For instance, if initially you took your avi files and produced a MPEG-2 SP file and now are reading that file in and what to create a MPEG-2 HQ file, yes you will have a loss in quality relative to the avi. (assuming your avi files initially had more quality than the MPEG-2 SP) However, if you intitally created a MPEG-2 HQ files and are now reading that in to do some edits and produce another MPEG-2 HQ file, NO loss in quality.
Often with video editing you "produce" several different sections of video and then combine all those clips into a final product with chapters and so on. It's usually desired that one produces these sections to at least the same quaility or higher than the desired finished product.
Jeff