What's best free editing software to use with hauppage hd pvr?

I bought the hd pvr w/o reading into anything, wanting to create xbox 360 video clips and upload them to YouTube. Now I've found some of the software can run up to $1,000 or more. I have windows movie maker becasue I heard it was good, but it's Ver. 2.6. I can't drag and drop any recorded clips into the timeline for some reason. If anyone knows about WMM 2.6 & YouTube I'd appreciate it too, but any software that's good for uploading HD clips to YouTube. I use Windows 7 by the way. Thanks anyone or everybody!