Use Nero to "create my own DVD" (recent release with startsmart)
It does the conversion and then burns it to a disk or image file all in the one go and even lets you create your own menus.
There is also an option to decrease the quality to fit more on to a single disc which works well as the decrease in quality is barely noticable. (no im not spamming lol )
My XP3200 1GB RAM system takes just over an hour to complete the conversion process for a single DVD of AVI files so if you have a slow system it could take a while.
Hope this helps.