lossless h.264 editing (preferably open source and on linux)

I would like to make my own personal edit of ANH based off of Harmy's despecialized 2.5 and his respecialized 97se. The reason being that I prefer some of the special effects of the SE (death star battle, maybe some clean ups) but prefer the special effects of the original version in other instances (the entire scene where Luke drives his landspeeder to the cantina).

The trouble is, I would like to losslessly combine elements of the two together (of course, that means that no quality is lost except for transitions between source). Is it possible to losslessly edit h.264 footage together?

While audio is a completely different issue (finding where everything lines up, and choosing the best elements from my favorite mixes; the main issue would be converting the final product into dts hd ma, because I don't have $1500 on my hands.), video seems harder to edit, as I don't want the whole thing re-encoded, just the parts where re-encoding is necessary.

I would prefer it if the video editor used was free, open source, and linux friendly, but if such options are not available, I can use windows, as long as the software is cheap. Mac OS X software is out.

Sounds like you're looking for Kdenlive:

http://www.kdenlive.org/features

I would also recommend "Ubuntu Studio".

ubuntustudio.org

It is an entire distribution completely dedicated to multimedia production, be it audio, photo, video, and as such it already comes with Kdenlive, and a bunch more useful programs and libraries. I've been toying with the live DVD lately and I'm impressed. For example, with Ardour, I was able to mix a couple of songs from scratch (well, I had the single tracks recorded in advance on another machine) making use of the many free effects that come with it.