olyteddy was talking about the 'audio'.
1ClickDVDMovie can convert the MP2 into AC3 2-channel while it is converting the Mpeg2 video to DVD compliant files (VOB, IFO, BUP).
ConvertXToDVD is also another converting program which is decent, but I forget if it had the ability to convert the sound to AC3 when I tried it.
TMPGEnc is another one and don't remember about the audio convertion on that one either.
All three above come with free trial periods, so you can try all thre and decide for yourself if you'd like to buy any of them. I tried them all and decided 1ClickDVDMovie was best IMHO.
There is the free MediaCoder, but I think it would be a little over the top for you and overkill. You might end up demuxing and muxing back together if audiosync issues arise with Mcoder.