What are some good free video editing software that's compatible with a sony handycam?

Window Live Movie Maker is free (see link) Either insert the finalized DVD from the camcorder in the computer's DVD drive or connect the camcorder to the computer with a USB cable. Copy the finalized .VOB files from the camcorder DVD to the hard drive. After copying the .VOB files to the computer, rename the .VOB files to .MPEG. For instance, if the original file name was VTS_01_1.VOB, it should now be VTS_01_1.MPEG or VTS_01_1.mpeg. Importing MPEG Files into Windows Movie Maker Live: After renaming the DVD camcorder file from .VOB to .MPEG, you can import it into Windows Movie Maker Live just like you would any other video clip by choosing File > Import Into Collections. I don't guarantee this method will work for every DVD camcorder file, it should work in most cases.

Windows Movie Maker is about as good as you'll get for free. More features = more of an investment. Someone has to pay the people who make a living figuring out how to keep up with technology and develop software that helps you use it. Other options include trying trial versions of various basic entry-level programs to see which one you like. There's Sony Vegas, Corel/Ulead VideoStudio, Avid/Pinnacle Studio, and a few more. You'll be able to download these programs and try them for free for maybe 14 or 30 days, to see if you like them. After trying a few, consider buying one that you really like. As I think you might be using a DVD camera, you might want to consider a program that works natively with those DVD files, as they're tricky to import and edit - DVD is full of headaches.

video editing free is not for ever