Now that you've described my situation so well

, how about giving us some more detail on that workflow? What do you do first, then next, et al? (Or at least, recommend as a workflow?). Do you convert to another format, edit to smaller size, save all versions, etc?
Personally, I've not found MTS format to be limiting : it uploads to Youtube very easily. But I would really like to streamline this whole process.
There are a lot of ways to go about it. Mac or PC, freeware or payware, natively edit or transcode first. Here is a sample workflow:
1. Shoot video onto memory chip
2. Insert memory chip into USB 2.0 card reader on PC
3. Clone memory card to an ISO file using
ImgBurn
4. Rename ISO with the day's date, memory card number (A, B, C, etc.) & log in an Excel file with a description (ex. 11Jan2012A - Baby's First Steps
5. Mount the ISO as a folder with
Pismo File Mount
5. Use
VoltaicHD to transcode the original footage into AVI
6. Import transcoded footage into your video editor program
7. Edit the video (cut clips, apply effects, music, titles, etc.)
8. Export to a master HD file (like a 1080p MP4)
9. Use
Handbrake to export to your final output formats (Youtube, Facebook, Email, DVD, Vimeo, Bluray, etc.)
A lot of people use
MPEG Streamclip as a free alternative to VoltaicHD. As mentioned earlier, some apps like Extensoft, Premiere, and Vegas can edit MTS files natively, so you don't need to transcode.
DVD Flick lets you easily make basic DVD movies from video clips. Not everyone wants to archive all of their original footage, so maybe just drop the clips you want to keep in a folder, instead of archiving an image copy of the entire memory stick to a folder with a table of contents.
There's a lot of variations. It really depends on what you want to do. You can go nuts and be super-organized and use high-end stuff and make a Bluray HD ultra-awesome movie, or you can just keep footage scattered in random folders and use free apps and just upload to Youtube. There's all kinds of methods to follow.
The one above is similar to what I do...I archive everything I shoot so that I can find it later, then transcode into ProRes for editing in Final Cut Pro, do my post-production stuff (editing, soundtrack, color grading, visual effects, etc.), then export a master copy. Once I have the master copy, then I export to whatever I want - Youtube, DVD, etc. And not every project is like that - if it's a quick video of my kiddo for grandma, then I'll just plug in the camera, pull off the video files & edit, export to a small movie, and email a copy.
The key is (1) figuring out what you want to do on a regular basis, (2) getting the right software to do what you want to do, and (3) installing it & learning it so that you know how to use it. Most of the time I shoot family & friends for fun and just send it straight to Facebook from my iPhone, maybe with a little iMovie editing on the phone itself. Voila, done. A lot of people get stuck on #3 - they'll invest in a nice editing package, but because it's such a bear to learn how to use, they never really do anything with it.
You just have to figure out what you're comfortable with and go from there. Windows Movie Maker, Extensoft Free Video Converter, and iMovie are free. MPEG Streamclip, Pismo File Mount, ImgBurn, DVD Flick, and Handbrake are also free. They are all fairly easy to learn how to use and will give you nice results if you take the time to practice a bit. It really just depends on what you want to do, what your budget is, and how much time & effort you want to invest in learning new software.