There are a lot of free avi to dvd converters out there now. The ones that can make use of the HC encoder can produce very good quality video. Take a look at AVStoDVD or FAVC to convert your avi file. Since these don’t offer editing capability, you might want to do that in your current program and save as avi, then convert. If that is an option.
Of course there are limits. If the running time of the avi is 3hrs, the compression necessary to fit onto a single layer dvd may hurt quality no matter which mpeg2 encoder you use. Have you considered using double layer dvds for very long videos?
If you need a complete package, editing plus conversion, you’ll probably need to look at commercial programs, like Adobe Premiere Elements, Sony Vegas Movie Studio or Corel Video Studio X2. These are not professional level, but should be sufficient for amateur use.