If you want to use Nero I believe you can do it with Nero vision express, but you will need to purchase a plug in for Mpeg2. This will do the encoding of AVI file to mpeg and write to disc.
The other way is to use TMPGenc to do the encoding. This is free from here.
There are alternatives available see here for all things DVD.
Regards Brian j
There are those more knowledgeable than me who may well add further to this info.