OK, a load of questions to try and help.
1. How is the cam connected to the PC - firewire or USB?
2. What version of Windows are you useing plus what service packs?
3. What setting is the cam in - record or playback?
OK lets see if I can predict what you are doing and answer the above questions before you have even read them
1. I would guess you have a USB connection. Forget that as it will never let you get full quality off the cam and onto the PC. The only way to connect and get full quality is via firewire, aka iLink, DV port or ieee1394. If the PC does not have firewire then you can add a PCI card with the ports on for under £20 and this should include the cable needed to go between the cam and card.
2. If you are running Windows XP with service pack 2 then there are loads of known problems with connecting firewire devices. Make a note of any errors displayed and get onto the Microsoft web site and do a search for 'firewire hotfix'. Download and install any fixes that relate to your problem.
3. When the cam is connected to the PC it needs to be put in playback or VCR mode to be seen by the PC. You must start the editing program only after the cam has been connected and put into VCR mode.
Right, how well did I do with the above

I hope it answers at least some of your questions. Now the big one, what software to use.
Forget the supplied software. This will just be for capture of still images or low quality video to a VCD etc.
If you are running Windows XP then that is supplied with a good basic program for capture & editing video called Movie Maker 2. Full help and advice on useing it can be found at
www.papajohn.org
If you are not running XP then you will need to buy something to do the capture & editing. Have a search around this forum for advice on what is good at the moment, and what to avoid.
Good luck with getting it all working. Let us know how you get on and feel free to ask any more questions.
Mark.