Movie maker is very limited in what formats it can output. As suggested you should save the output as another AVI file. This however will not fit on a DVD, and if it did a standalone player would not play the disc. What you need to do is author the AVI file for DVD. This means that the file needs to be converted to MPEG-2 so it will fit on a DVD disc and be able to play in a DVD player.
Nero (5.5 or later I believe) will do this, but
AFAIK only if you have the full retail version. I have Nero 6 OEM and can't find a way to convert file formats, but there again I normally use Ulead DVD Movie Factory to do my authoring so haven't really looked that closely at Nero.
Mark.