well, i'm actually quite out of shape considering the cutting business, though i'm cutting more than ever, but this time its vegetables that i'm cutting, becoming a cook.
and i really cannot say much about freeware. i've worked with profesonal tools like avid or final cut. but at home i used edius and fell in love with it.
from the list pole posted i would recommend the lightworks software, though i don't know it. but it seems to have a preview window, which i find necessary.
i found a free download link to edius:
http://edius-5.soft112.com/the decision to make depends also on the hardware that you're using.
edius is a tool that has (had?) many drag and drop options, i liked that for the workflow. and it was able to combine different video formats in one timeline.
normally you should have a preview window in which you load the clips you want to have. there you set in and out points and drag them to the timeline. when you combine clips you can drag transitions to the edges on the timeline which apply there. you can also move a jpeg in there and combine it with an effect. you can add timelines, so that you can have different layers. you have a clip running, add a timeline, drag the photo at the point you want to have it and add an effect on how you want the photo to appear. you can also work with opacity/transparency of the whole timeline to make clips appear.
i don't know if that freeware is running with your system, but i would recommend edius for editing.