How do I get data from OpenStreetMap which I can then edit in QGIS layer by layer?
What is the best OSM output and what / how do I get to a suitable input for QGIS?
OR...is there another approach to this?
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The Openstreetmap plugin does what you want. Unfortunately, OSM hit a 64-bit-numbering limit, which forced all software using node numbers to be rewritten.
The improved Openstreetmap plugin will be available with QGIS 2.0, which will be out within the next few months.
Until then, you can look out for Geofabrik shapefile extracts. They include not all features, but maybe enough for your purpose.
The spatialite_osm tools make a tidy job of importing and managing OSM data.
We just completed an update to our OSM database at WeoGeo. You can extract layers for any location in many of the standard vector formats (shp, tab, etc.) for free. Once you have downloaded the area you want, you can load the files into QGIS for editing.
You can use QuantumGIS 2.0. This will change it to spatialite file which can be used in any GIS softwares.
process is here How do I load OSM vector data in QGIS 2.x?