A good program for mpeg to Avi is Avidemux 2 (AVD2).
With this program you can convert, edit, crop, all from the same interface.
Dvd Shrink is a good prgram to reduce the size of your files, and could even be run before AVD2, to reduce file size (its easy to use and does encoding real well).
Mpg2Cut2 is a great program for cutting scenes out of mpeg files, with out having to do any converting. It is very fast.
The audio should be done seperately, with BeSweet, to mp2 for mpeg files (Dvds are M2P or mpeg 2 files)
and mp3 for avi files. (mp2 works in avi files also). Besweet does a good job of compensating for the audio offset, that exist in most DVDs.
By using BwSweet, to demux out your audio stream, you can then mux it back in, with AVD2 while or after it is done encoding.
For all the video editing I do, the 4 programs mentioned above are my most used, out of a collection of over 40 programs.
BTW, if you are making files to play on a stand alone DVD player, that is AVI compatible, they usually will also play raw .mpg files (m1p and m2p, as well as renamed vobs). So it may not be necessary to convert to AVI (mpeg 4) for these uses, and DVD shrink can usually get files down to close to Xvid-Avi size.
Burn mpg and avi files like data files.