To merge two avis you can use virtualdub. Simply open the first avi and then select, from File menu, "append" and select the second avi. Select also direct stream copy from video and audio menu, otherwise virtualdub reencode the entire movie.
To convert the merged avi into DVD format, use TMPGEnc to convert avi in mpeg, and TMPGEnc DVD Author to convert mpeg file in video DVD.
If your avi video have an audio stream encoded in VBR (variable bitrate; you can see it in virtualdub), first to encode with TMPGEnc you must save from virtualdub two separate files: the audio stream as wav file, and the video stream as avi. TMPGenc will use these files to encode mpeg.