Welcome to the forum.
Your problem is interesting. I have no direct experience of the mmv format, having taken good care to stay well clear;)
However, if you can get a conversion to MPEG2, you should then be able to convert that MPEG2 to a variety that will do the job you want. If it were me, I'd start with MainConcept's stand-alone MPEG encoder, which will take the combined Video+Audio stream and output either separate or combined streams, according to choice, in new bit rates.
If the object of the exercise is to produce a DVD, you could then use the new MPEG2 with something like Ulead's MovieFactory, which is cheap and good, or one of the fancier DVD authoring packages. You may already have one?