Video editing

[WILDECELT]

Hi All

I've recently edited a short film which i want to convert to DVD without losing Quality etc..
I'm using Sony Vegas pro 9 and have rendered the movie as PAL 4.3 this has created a AVI file size of around 3gb.
I've then run it through Virtual Dub applying the deinterlace filter and the compression codec xvid.
This results in a file size of around 160mb , so basically as i'm new to all this i want to burn it to DVD using Nero (as i like the custom menu options) does it need to be a mpeg 2 because i've imported my file previously into it and followed the instructions and when it burnt the disk all it gave me was audio/video_TS files ?.
So if anyone could help me that would be great i guess i want to know is whats the best was to Convert a AVI file to DVD