I’m fairly certain that iDVD5 will do 2 hours. (I think that version 4 only did 90 minutes.)
I’ve never actually used iDVD for anything over an hour so I can’t promise you that, though. The one clue I’ve found is that the Apple web page says that iDVD5 will now allow you to burn to a dual-layer disc and put “4 hours of video” on it. Since 2 layers gives you 4 hours, I’m ASSUMING that a single layer will take 2.
Is it going to be exactly two hours, though, or slightly shorter? Back when the limit used to be 60 minutes I found that you could only go up to 54 minutes or so since some space was taken up by menus and other DVD-code.
There’s no problem with Final Cut. Just save your movie as a Quick Time movie and drag that into iDVD. (Check the iDVD preference settings first to make sure it will compress it the way you want before you drag it in.) I’m fairly certain that you can simply “Export” as a QT movie with “Make Self-Contained” UN-checked and that will work. (If it doesn’t, use the “Quick Time Exporter” to make a file. That’s not as good, though, so try the other way first.)