If you have a dvd player that will play avi files, then burn them in avi format to the dvd as Data type.
If you need them to be converted, then when they are converted to mpeg2, the file is going to be much larger. Depending on the length of the movie files, you will only be able to fit 2 or 3 on a DVD if they are 1 hour each...and so on. Not sure about telling it to compress the mpeg2 further, most likely you will lose video / audio quality to make more fit on a DVD if it is even possible.
Brian