When burning a DVD you don't want to convert the AVI file(s) to anything before the DVD authoring software creates the disk as this will mean there are 2 conversions which will result in a loss of quality.
Nero 6 should be able to do the conversion and burn the disk, but it will not be able to create menus or chapters on the disk. What version of Nero 6 do you have? OEM or full? Most OEM versions are restricted as to what they can do to try to get you to buy the full package. IIRC this costs around £30 as an online download as an upgrade.
I have an OEM Nero 6 but don't use this for creating video DVD's for the above mentioned reasons. I use Ulead DVD Movie Factory 3 that is very simple to use, includes basic editing tools and does create chapters and even animated menus. This can be bought online for around £25 and the results arevery good.
Mark.