To get the best quality you should capture the footage in AVI, then edit and render in AVI, then encode to MPEG2 for the DVD.
This thread in the DVD bit of the forums might help: http://www.videoforums.co.uk/viewtopic.php?t=380, it explains what you can do to fit your video onto a DVD-r,
I use TMPGEnc to encode my files to DVD compliant Mpeg2 (free here: http://www.tmpgenc.net/e_download.html but Mpeg2 encoding is limited to 1 month), I find it gives good quality, and you should be able to fit 85 minutes onto a 4.7Gb dvd no problem.
I don't know much about the software you've got, I've used Sonic MyDVD a couple of times with MPEG2 source footage from VHS, and it worked fine, I can't remember if I needed to tell it not to transcode, if you're capturing in MPEG2 make sure it's DVD compliant, then you wont have to re-encode it to put it on a DVD.
Hope this helps, or at least gives you somewhere to start.
Panasonic SD9, Panasonic NVGS-75, Canon MV600i