Are there BD Authoring software that could re-encode the movie to make it smaller, I'm not talking about cutting it. Just to lets say re-encode 25gb MPEG-2 to smaller MPEG-4

and then be able to fit two movies on single disc?

Nero Vision can do that, but only interlaced.

for example MOVIE A is 2 hours and 35 movie on BD and only 11gb with video and AC3 sctream, no need for a 1 hour and 40 minutes movie in MPEG-2 to be 25gb.