Unfortunately I don't have version 7. Bu the post below refers to the correct capture settings in version 8 and includes a screen dump hakfway through. I think you will just have to find the equivalent in v7.

http://www.videoforums.co.uk/ftopic2748.html

I set my project settings (File > Project Settings in v to MPEG, PAL DVD Compression and VARIABLE bit rate of 8000kbps. At this rate I get 60 minutes of excellent quality video to each DVD.

Your AVI capture will take about 1Gb for every four minutes. Your output files will be a lot less than that. So you should get about 20 of your 3 minute movies on a DVD at best quality.

I'll do a bit of digging to see if I can find the exact menu sequence for v7


Meantime good luck

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IBM A51p with 160Gb Boot Disk, 160Gb external Firewire Disk, 2Gb Memory and a super duper sound card, 17\" TFT Monitor etc etc etc
Sony TRV33e : Sony TRV310e : Canon XM2
ULead products mostly including Mediastudio Pro (V8.0), Video Studio 8, Movie Factory 2.0, Premiere Elements

Remember, there is always more to learn than there is to teach.