Not familiar with that program, but sounds like you are converting using too small a bitrate. Look in the options/settings and see if you can raise it to 5000-6000 kbps or so. It really depends on the length of the video and your target size.
You can use a bitrate calculator to find an optimal rate, depending on the length of the video in time.
Here is an online calculator over at videohelp.com: http://www.videohelp.com/calc.htm
If you are interested in a free alternative, I recommend FAVC. It uses the HC encoder and produces excellent quality results for avi to dvd conversions. Its only weakness is that it only makes basic menus…if you want something fancy, you’ll have to use a different program. It does give the option not to make a menu at all if you prefer.
You’ll need AviSynth and Net 2.0. They are free and there are links to them at the FAVC homepage I linked above. Use the HC encoder and Best quality settings. If you have a dual/quad core processor, use the Predictive Quantization in the HC settings. If you have a single core use two pass VBR.
You can set up FAVC to automatically burn the dvd to disk using ImgBurn. Excellent burning program, and comes with FAVC.