DVDs are MPEG2, VCDs are MPEG1. Whichever you choose, you'll need to convert it with some software. Very few DVD Players will allow you to just burn a .avi as a data CD and play it.
Actually, if you have Nero you can just choose CD> Super VideoCD, and Nero will convert it for you. DVD> DVD-Video requires it to already be in the correct format.
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