I use Pinnacle 8 software to convert the AVI file from the camcorder to MPEG2 and then write to DVD. There is freeware available as well, but I don't have it so can't comment. Pinnacle 8 (ful version) is very intuitive and good for editing.
You can write to CD using the software, in either VCD or SVCD format. Most DVD players will read VCD but not so many SVCD. Neither is as good quality as DVD, and the one attempt I had at VCD was such poor quality as not to be worthwhile (people compare it to VHS quality, but I found it to be significantly worse). Hence I've moved to creating DVDs with a dvd writer.
The DVD help forum has lots of advice on writing in all the formats click here