It's not the size of the file perse, but rather the length of the video. If the video is 1.5-3 hours, you need to find a way to increase the compression ratio to fit it on a single DVD. chances are, iDVD is encoding at a higher bit ratio (ie: 5.0 Mbps average) and is causing the file to be too large, unless it's a very long video.
iDVD is kind of limiting - there may be a way to force higher compression, but I honestly don't know how (xstep knows a lot more about iDVD then I do, and might be able to pipe in as to whether it can be done or not). Other options you have are:
Convert the video file into an mpeg2 file for video and ac3 file for audio yourself using some 3rd party converter that would give you more control over the average bitrate. Depending on the conversion package, you may need to obtain the mpeg2 plugin from Apple.
Use a different authoring program that might offer more options for compression.
Some options you have for authoring:
Roxio Toast (costs money) - not sure how much control there is over average bit rate, I don't use toast for authoring, but many here do.
Burn (free) - once again, not sure how much control there is over average bit rate, I don't use burn for authoring.
Moviegate (costs money, cheaper than toast) - there is a slider control to adjust the average bitrate per video file added to the dvd project.