Well, I would delete the avi if all you want is a dvd mpeg. Then I would use the Adobe Media Encoder to export your movie to NTSC DVD preset. That should result in a file the DVD Authoring tool you have can use.
If you have ppro, just export to DVD. (as long as your file fits the available space on the DVD media)
Otherwise, you can import your existing avi into Adobe Encore (or like product) and create your dvd from there.
Hope this helps,
Chris