Yes nero does require you author .VOB files to be able to burn a DVD movie, there is also an DVDmpeg2 plugin so nero can do it for you, but from what I remember, it wasn't great, but this could have improved.
Try TMPGenc it is easy to use and good quality
http://tmpgenc.pegasys-inc.com/en/index.html
also try
www.videohelp.com
they have a huge list of software in the tools listing and many tutorials on how to use it.
Last of all windows movie maker is fine for basic editing, but you should always capture and export DV-AVI format and then convert that in to DVD MPEG2 to get the best results.