Yes, the only clear advantage to converting avi to dvd video is compatibility in all dvd players.
Some dvd players that are out now will play [B]some[/B] types of avi files with no problems, especially divx. But that comes down to the capabilities of your player.
As far as quality is concerned, the output will not be better than the input. With a good encoder, and the proper settings, you can keep the quality very near the input levels.
Of course, if your avi file has problems of some sort, it is possible to use filters to remove many such errors, and the result may be better esthetically. In those cases, the output may look better, but that is not the usual scenario in converting avi files.