Video Edit Magic can edit all standard VOB files (that don't contain chapters) directly. You may need to install the free (GPL) MPEG Decoder, which we make available for download here:
http://www.deskshare.com/download/mpeg2decoder.exe As I wrote, each time you convert a video file from one format to another, you reduce the quality. Since editing VOBs is easy and takes less time than ripping, yes, I do recommend that you do so.
As for final bit rate, 4000 kbps is [strong]very[/strong] high. DVD quality is dramatically less than that, for instance. I think 2000 kbps would be more than adequate for embedding video in PowerPoint files. In fact, I would suggest you try a lower bit rate first to see if it suits your needs.
To avoid surprises, I always recommend practicing a presentation using the same computer before presenting in front of an audience.