A lot of people use a program called TMPGEnc Plus (its free). Its very easy to use, no need for separate audio and video files. Be forwarned -- it takes a loooooooong to convert avi to mpg. I recently converted all my old camcorder tape to dvds and it typically took 5 hours of processing time for every hour of video (this was the highest quality setting though).

M60s (previously 22ti)
VP150
Epik Castle
Q8 Surrounds