Maybe TMPGENC refuses this file because of audio stream: it's not able to manage ac3 audio tracks. To use TMPGENC maybe you can try to split audio from video with VirtualDubMod, saving video and audio as separate files (use direct stream copy for video and save andio in uncompressed wav). Then TMPGENC will be able to convert avi in mpeg.
To author you can use TMPGENC DVD Author.
Try to take a look in
this site: is more specific for video.