DVDShrink isn't going to do it, because it needs dvd-video to start with, and tango602 is starting with an AVI file.
Try using an avi to dvd converter. It should compress the movie to fit a single layer dvd, or double layer dvd depending on which output you choose. AVStoDVD, FAVC and DVDFlick are all free and can do this type of conversion. Running time won't change.