it really depends on what you want to do. For fancy stuff the freeware route might not be the best one. It is all possible though. You can create a perfect fanedit all with avisynth, as it is a non linear editing tool that allows transtitions, even audio transitions from what I have heard, cuts, special effects, zooming, AR change and a bunch of other stuff. But it is really complicated to use. There are a few programs that offer a GUI for it.
Cuttermaran can handle smart rendering, but it has a lot of bugs IMO.
Graph Edit can also do it all and is again very difficult to use. There are a lot of guides online though.
MPEG-2 Schnitt seems to be a nice editor, I haven't tried it though.
BUT, really, in the end you will probably get to use a high quality editing tool, like almost everybody here uses it. Vegas Video can do it all. Womble is good for its smart rendering engine and not too expensive. Adobe Premiere is a good one, but it requires a lot of training and very specific file formats to work with. Ulead Media Studio 7 is a fine and cheap editing tool (although old), cannot handle surround sound, but can like vegas and adobe use frameserve to export. Ulead Media Studio Pro 8 is expensive and has a lot of bugs. It's still a great editing tool though, but still expensive.
Those are the ones I can recommend. There are a lot more editors out there, but so far nothing really good came from them.
And once again, it really depends on what you want to do.