Free/Cheap Video Software?

I became a new dad recently and therefore had to do my duty and buy a camcorder so I can film my newborn's precious moments. I bought the Sony DCR-SR47/R, and while I'm pretty happy with the camera, I'm a little disappointed with the video quality. I'm also not too thrilled with the included PMB software from Sony either. Does anyone know any free or cheap video software out there that can do a little more than basic video editting such as fade ins, seamlessly combining clips, improving video quality and adding tracks to clips? Any recommendations are welcome, but I'm cheap so good free software's what I'm looking for.

 

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