Couple if issues, its always best to convert the AVI as is to VCD and cut afterwards, you get no audio sync problems that way. If you follow the DVD2SVCD with TMPGenc way as in the Tutorial section, it will automatically cut the movie for you as well.
"...the program it brings up jargon about how it will rewrite VBR values into CBR or something along those lines." thats telling you the audio stream is VBR (Variable Bit Rate) and VirtualDUB cant handle that correctly. Use NanDUB instead of VirtualDUB when ever you see that error.