they are AVI files sizing 170MB to 275MB
If you are converting to DVD the file sizes are not relevant. What's the running time of this project?
Fit to disc is correct. But either way it's odd that only the last episode didn't play.
What do you mean by 'didn't play'? It was there but stopped?
You might try converting only the problem episode and see how it goes. You could also try DVD Flick (free) to see if it's a Nero problem.