I think you need a DVD authoring software to compile your avi or any video files into VOB files and their associate files, and create chapters as well. These VOB and IFO files are needed for DVD playback. I have this Magix software I got from a software shop at Greenbelt (2nd flr near the cinemas) for 1.2T late 2004 when I was playing with my new computer. I think the shop is still there, though not sure if the software is stilll available. There may be newer ones.
Alternatively, there are shops on the periphery of Landmark that sells you-know-what and there are so many DVD authoring softwares there for a measly 100 pesos per disc.
I haven't actually done video files compiled into VOB files, just compiled VOB chapters ripped from various MTV and concert DVDs into a single DVD. In your case, you may need to convert avi files first into vob files needed for DVD playback. I think any DVD authoring software can do that, but it will take a great deal of time and processing.