Have you tried ConvertXtoDvd from Vso Software?
It does what it says and is simple to use.
Check / Repair your avi`s with Digital Video Repair.
You can get it here:
http://www.videohelp.com/tools?s=12#12
As far as the Episodes / Chapters are concerned I can recommend Nero.
There may be a simpler way but it`s the only one I know.
Check and if necessary repair your avi`s with DigiVid Repair.
Load and convert with ConvertX (at the bottom you`ll see how many Gbs your DVD file is) I got to about 4Gbs but others say it`s irrelevant.
Run your finished "Film" in Nero under Nero recode>Recode DVDs & Videos to Nero Digital.
There you`ll see on the right hand side the menu point "Chapters" which allows you to erase old/set new chapters.
I`m sure the are many ways to achieve what you want but, like I said, this way does work, especially for music Dvds.
Have fun
