because your file won't play on either power dvd or WMP.. it sounds to me like you haven't got the right codecs. download and install them and see if that helps. try here for divx codecs, or a lot of people recommend k-lite codec pack (at least i think that's what it's called!) i'm sure if you search this site though you will find out which codecs to install.
basically, the avi file needs to have the audio and video seperated and converted to an *.MPV file (video) file and the audio converted to either *.AC3 or *.MP2
then those files need authoring into *.VOB *.IFO AND *.BUP files
then those files can be burnt onto dvd!
the software does most of the hard work, you just need to set it all up correctly (as directed in the guides).
i know it all seems technical, first time i read the guide i was horrified!! but it's really easy to understand and follow (chickenman ), and you'll probably find once you've converted a couple of avi files, you won't even need the guide as much anymore.
yes, it is a bit time consuming and fiddly.. but the end results are well worth it.
hope that helps
NB.. i'm a novice myself, so if anyone who has more knowledge than me wants to corect any mistakes i've made, please, feel free!!