I did a test. Same AVI, using WinAVI Video Converter v7.6.
I like WinAVI. It converts to a bunch of formats, seemed simple to use. Not a lot of setup required.
Using default options WinAVI only took 25-30 minutes. The picture looked virtually like the original file.
I changed what I think is the quality to highest, and it still only took ~30 minutes.
Default settings: The problem, like other programs, the audio does not sound good. It is very stuttery throughout the whole thing. Other programs played fine on the computer but stuttered a bunch when played on a standalone DVD player. This one was stuttery on the computer.
I played with some audio settings, (Checked) Enable MPEG2 DVD Audio and (unchecked) Use Built In Decoder, now it plays fine on the computer. Haven't burned it to DVD yet.