File size is ignored, only length matters, and compressing to the standard DVD format of mpeg2 is exactly what iDVD does.
Why is there no iDVD on my new Mac? How do I get it and how do I install it?
https://discussions.apple.com/docs/DOC-3673
iDVD encoding settings:
http://support.apple.com/kb/HT1502?viewlocale=en_US
Short version:
Best Performance is for videos of up to 60 minutes
Best Quality is for videos of up to 120 minutes
Professional Quality is also for up to 120 minutes but even higher quality (and takes much longer)
That was for single-layer DVDs. Double these numbers for dual-layer DVDs.
Professional Quality: The Professional Quality option uses advanced two-pass technology to encode your video (The first pass determines which parts of the movie can be given greater compresson without quality loss and which parts can’t. The second pass then encodes those different parts accordingly) , resulting in the best quality of video possible on your burned DVD. You can select this option regardless of your project’s duration (up to 2 hours of video for a single-layer disc and 4 hours for a double-layer disc). Because Professional Quality encoding is time-consuming (requiring about twice as much time to encode a project as the High Quality option, for example) choose it only if you are not concerned about the time taken.
In both cases the maximum length includes titles, transitions and effects etc. Allow about 15 minutes for these.
You can use the amount of video in your project as a rough determination of which method to choose. If your project has an hour or less of video (for a single-layer disc), choose Best Performance. If it has between 1 and 2 hours of video (for a single-layer disc), choose High Quality. If you want the best possible encoding quality for projects that are up to 2 hours (for a single-layer disc), choose Professional Quality. This option takes about twice as long as the High Quality option, so select it only if time is not an issue for you.
Use the Capacity meter in the Project Info window (choose Project > Project Info) to determine how many minutes of video your project contains.
NOTE: With the Best Performance setting, you can turn background encoding off by choosing Advanced > “Encode in Background.” The checkmark is removed to show it’s no longer selected. Turning off background encoding can help performance if your system seems sluggish.
And whilst checking these settings in iDVD Preferences, make sure that the settings for NTSC/PAL and DV/DV Widescreen are also what you want.
http://support.apple.com/kb/HT1502?viewlocale=en_US
