You could try using Canopus Procoder 2 to convert virtually any format to any format, including AVI to MPG2. Easy to learn and use, transcodes between NTSC <-> PAL, 24fps <-> 30fps <-> 25fps without leaving jerks and jumps in the video, and keeps the audio/video sync correct.
The only downside to this, Canopus Procoder 2 is commercial and not particularly cheap.
Simply to alter the time length of the audio, you can use Nero Wave Editor. Load the audio stream and change the time without changing the pitch. A bit of trial and error may be required to get the exact timing you need, but it works.
Sometimes, converting between video format, example NTSC Film, 24fps to PAL 25fps, starting with a 90 minute film will give you approximately 85 minutes of video, but still 90 minutes of audio. Changing the time length of the audio in Nero Wave Editor to the same timing as the video will get rid of lip sync or dropped frame problems. You need to get the audio timing exactly right though, hence the "trial and error" bit.