I believe that if you edit DV natively (in a sequence matching the video files) and don’t apply any effects, a dv avi can be exported which is identical in quality – so no further compression takes place. I believe that if you apply effects like saturation etc, the files will be recompressed again before export. To a laypersons’s eyes the quality drop might not be noticeable.
In my experience editing SD miniDV footage with minor color correction, the exported DV avis would be noticeably better than an exported DVD Mpeg2 file of the same.
DV avi may suit you fine to master your SD project to, but some might recommend a much larger file/codec to avoid a-recompression-quality-drop.