I think there's a bit of confusion going on here.

AVI is a video container format, a method of multiplexing audio and
video together. ISO is a filesystem specification. You can put what you
want onto that filesystem, not necessarily the contents of a DVD video.
Apples and oranges.

If I understand what you want to do, you have a bunch of .avi files that
you want to transcode to MPEG2, then package that MPEG2 data into a
DVD-Video.

For the transcode job I'd use ffmpeg.

You'll then want dvdauthor to package the MPEG2 data into the various
.IFO and .VOB files found in the filesystem of a DVD-Video.

Finally, you need the cdrtools package with genisofs (formerly named
mkisofs) to make the ISO image you want, then dvd+rwtools to burn that
ISO image to your DVD, although cdrecord/wodim will do that for you in
some cases.

I'm sure there are lots of GUI tools to front this software, but I
always found it easier to learn the command line tools than mess around
with a GUI, especially as the machine I used to do this kind of work was
on the network and didn't even have a screen or keyboard connected to
it, let alone a mouse. More often than not I'd batch process the lot in
a script and have it work overnight.