I recently had some 8mm film transferred to DVD. I converted the DVD to a .dmg file with Disc Utility for the import into iMovie '11 but for some reason iMovie won't recognize it when I open the .dmg file. No how, no way...

Is there some other way I can import this video into iMovie '11 without degrading the quality?

Rip the dvd.
Convert the file to dv.mov.
Import to imovie.

Product - DVDxDV (http://www.dvdxdv.com/NewFolderLookSite/Products/DVDxDV.examples.htm)