There isn’t a way to directly import a DVD into Windows Movie Maker. DVD usually contain two folders. AUDIO_TS and VIDEO_TS. Don’t worry about AUDIO_TS. All the files are in VIDEO_TS. Inside VIDEO_TS are VOB files. VOB files are essentially MPEG2 files. Sometimes you can just rename the extension to MPG and you can import them.
Most of the time it takes a few extra steps to import a DVD into movie maker.

There is a fre program called VOBTOMPG which can convert VOB to MPG files.

Once the VOBS are converted to MPG they can be imported into Windows Movie Maker

“High quality” and Youtube are an oxymoron. No matter how great your video looks on your computer Youtube will compress the snot out of it and convert your sound to mono.

YouTube accepts most common video formats including WMV, MPEG, MOV and AVI.

I created a test clip and then encoded in different formats and rates.

You can see the clips here
http://www.youtube.com/view_play_list?p=03E42D05F3584B4A

Everything looks pretty good at 640×480 or higher. I think the AVI clips looks the best but it was almost a 200meg file for a 53 second video. Depending on your software I would likely choose the 3Mbs WMV or MOV format. Also if you create a file in H.264 format I’m pretty sure Youtube will still re-encode it anyways.