Sadly the Windows Burn to CD option doesnt work well with DVD's. Thanksfully Vista has a burn to DVD application.
But till that comes out and is stable enough for daily use. Nero is the best way to go about burning .avi files to DVD and have them be usable on DVD players that can play those type of files.
With the Windows CD burner it turns the files types. It changes them from .avi to WMV. Same thing happens with music. It changes them from mp3 to WMA. Dont know why but it seems that WMP like to have everything be Windows Media.
At least this has been in my experience.
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Phone: LG Optimus G Pro
Running: Stock JB from LG with Nova Launcher