avi is an uncompressed format whereas mpeg2 is compressed and therefore should be smaller file size (unless you stuck a LOT of effects/filters in)
Increasing the resolution will not improve the quality only make the picture bigger (as well as the file size)
How many passes is Nero set to make when converting from avi?
In Vision click on the More button at the bottom and then on Default Video Options and on the General tab is Nero Smart Encoding set to Automatic?
Then on the DVD-Video tab
Is Quality Setting set to Standard Play?
Is Encoding Mode set to Fast Encoding?
Its not an abnormally long time for a 2.4GB file.