You need to create each film as a chapter. I use Cucusoft Video Converter to put avi clips on to dvd.

As for converting dvd to an avi, not the foggiest m8, I really am struggling with this. I think you have to "backup" the dvd, then re-edit it or author it, remove all the menu's, chapter segments, subtitles and special features, and basically just have the film. I spent about an hour talking to Gizmo about it and he baffled the fuck out of me