Its not the compression per se, but more the bitrate of your video. Certainly some encoders offer better quality compression for any given bitrate, but to get a few file sizes down low, you need to reduce the bitrate to the lowest compatible setting for DVD (and perhaps use MP2 audio rather than uncompressed PCM). With PCM audio, you can get approx 1.5 (one and a half
) hours of video on a DVD at an average bitrate of 8000kbits/sec (good quality), or 2 hours with MP2 audio (not strictly speaking DVD compliant, but playable in most standalone DVD players).
I always encode my MPEG2 files in TMPGEnc, then import the MPEGs into Sonic DVDit! to author the VOB files and menus.