1) Yes you will in media player.
2) You will need a programme to convert the avi to mpeg format, TMPGEnc or Main Concept MPEG encoder will both do the job for you. Then a programme to convert that into the vob(?) files recognisable by DVD players, TMPGEnc DVD Author for example. The DVD author prog also lets you set chapters and make menus. I use all these programmes and they are pretty easy to use.
The conversion from avi to mpeg is the longest part of the process.