I ALWAYS use a seperate encoder when making DVDs. In general (and with no filters etc) my PC will encode from AVI to DVD compliant MPEG2 in 2/3 real time (longer with de-interlacing, 2-pass etc). Then I've got a 4x DVD burner, so 1.5hrs should be done in a quarter of that time (in theory). So if all things went according to plan, I'd have a 1.5 DVD encoded and burned in around 2hrs.
Your harddware sounds more than adequate - but encoding is the most CPU intensive thing you'll do with a PC and DVD Burners are still SLOOOOOOOOOOOW (and will be for a while until some bright spark works out a way to overcome the data transfer rate limitation!)
Even if you had the best equipment, you'd still be twiddling your thumbs waiting for your movie
