Just to re-iterate what has already been said.....
DVDs use MPEG2 format, which AVI is not. You are using Studio 8 so if you drag the avi file into the storyboard (without or with editing), then wither create a DVD directly from Studio, or create the DVD files on your hard disk. These can then be burned with Nero.
www.vcdhelp.com is a good place to start if you're new to burning DVDs.
For DVD backups I use a cool program called DVD Shrink, which will manage to fit a dual layer disc, which typically contains more than 4.7GB of data, onto a standard DVD-+R with little or no loss of quality. Most movie disks are dual layer, and if backed up won't fit onto one standard DVD-R. The solution is to remove all the extras, additional sound tracks, languages etc..... Of course you're not allowed to break any copyrights, so you can only use this procedure for backing up your own discs.......
EA