After you have captured the video (DV-avi) keep it that until the time of rendering, don't convert the video from the original to another format then convert again to another format you are reducing the quality,
capture the videos directly into Vegas, edit and then render/export/save as (again DV-AVI)
Another problem you are having is that your video file as a DV-AVI is going to be 24-36GB that one big file.
I have used nero for years and for my own videos I find it quick to bang a few videos onto a DVD (Nero Vision) Always works with DV-AVI, I am writing DV-AVI because an AVI is not a video format its a container, and inside the video can be many things. DV-AVI tells me the codec used to compress the video.
How long is it going to take to render, that will depend on your system, My computer about an hour, ish, my sons about a day.
By trying to put three hours of video onto a DVD is not going to give you the best quality, try to keep them less than 90 minutes
The way I would process the video.
capture video, through software (I use Premiere for work), edit and do what ever you want to do with the video, (leaving that bit open as I add chapter marks to export to Encore or for other processes) render, and build your DVD menu, burn to DVD.
As I dont use Vegas, played with a trial copy a few years ago, I dont know the way that it does things.
Hope that helps a little
RR