You’ll need an mpeg editing/authoring program. Womble Mpeg Video Wizard DVD is an all-in-one program that can do what you need. Not free however.
If you just need the editing capability, you can use something like VideoReDo Plus, then author to dvd in your regular manner. This is also a commercial product.
The only mpeg cutting program that I know of that is free is Cuttermaran, but it needs demuxed video and audio streams. You can demux mpeg files with the free version of TMPGenc, or with ProjectX (free). This isn’t the simplest solution, but will save some cash. http://www.videohelp.com/tools/Cuttermaran