colour: I expect Mike will (_!_)-in. In a minute

Colour answered correctly, but since he insisted that I jump in......
Henry, it's wise to break the project into smaller chunks, and save the files (chapters) as you go. It seems to simplify things for me, eases the load on the computer by rendering as you go, and is a safety net in case of some sort of corruption of the Studio project. The described process works well for quickly breaking a video into smaller files. Any other variation of file creation will suffice as long as it works for you.
The statement of lossless can lead to some disagreement if you are splitting hairs. But I haven't seen any loss of quality by rendering things to .avi again and again. I once rendered a file 10 times, and the last one was equal to the first one when viewed on a TV screen.
I render my files to DV/AVI, which is the "Full Screen / DV" setting in Studio. I've never used any of the other settings with an .avi file.