It will create all the files that need to go into a VIDEO_TS folder
Here's what I do:
(*Note, I am burning using Roxio's Toast Titanium)
Create a folder with the title of your movie in all caps with spaces being "" i.e. "STARWARS" for example
Inside that folder create another folder titled "VIDEO_TS". If you actually look on a DVD in your DVD-ROM it will have two folders "VIDEO_TS and AUDIO_TS" The AUDIO_TS folder is redundant. It is only for audio DVD's
When DVD2ONE asks for an output folder select the VIDEO_TS folder within the folder you created for your movie.
Now convert and let DVD2ONE do its job... afterwards open Toast and under the "other" portion of the menu select DVD
Drag your folder to Toast and burn