Typically, if your total file sizes are smaller than the DVD capacity, it should not try to compress them further.
This is a stupid question but since you have the DVD setting set to use a disc that’s 8.5GB, are you using a disc that is 8.5GB? Is it dual layer or double sided?
You could also use the TRACK SELECT tool (keyboard shortcut A) hold shift and drag all the clips in your timeline further down, creating more space at the beginning. However, Jon’s way is probably better. =)