Why not burn onto a DVD-R? It will play in more DVD players and all computers and be better quality. And if you use a cheap disk it will only cost you 50p odd. And will save you lots of time trying to convert it!
Failing this you (or the person your lending the thing to) could almost certainly just download the episode from Kazaa already in the correct format! If you have broadband it wouldn't be much slower than trying to convert it!
However if you really, really want to convert it to VCD then there are a variety of processess you can use. Your first requirement would be to demux the VRO file on the RAM disk into .m2v and .ac3 streams in a programme like TMPG Encoder. You would then need to hunt down a programme that will re-encode MPEG2 into MPEG - I don't believe TMPG Encoder will do this with .m2v files and it's been too long since I did this to give specific advice on a particular programme so take a look at:
http://forum.digital-digest.com/
...where you'll get specific, useful, advice. Once you've got it into a format TMPG Encoder can recognise (.AVI etc) you can re-encode it to the VCD MPEG specification.
There are of course one package solutions out there but I assume you are looking for a free solution - otherwise I assume you would 'buy' the Simpsons DVD!