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We are working on some guides for kvcd'ing. In the meantime you could get familiar with the process of conversion by reading some of the guides listed below.
Sefy's
http://www.kvcd.net/guides/sefy/intro.html
You would use the KVCD templates though,
http://www.vcdhelp.com/tmpgencxvcd.htm
http://forum.vcdhelp.com/userguides/94288.php
http://www.vcdhelp.com/tmpgenc.htm
Quite simply, you would use the tmpenc encoder load you avi file, choose the kvcd template and encode.
First off though--check the compatibility list- to see if you player is listed as being able to play kvcd's. If you're only playing back on the pc, then you're okay.
http://www.kvcd.net/forum/viewforum.php?f=13
And/or dowlonad a sample from the main page
http://www.kvcd.net lower left,,,burn to cdrw using nero or whatever app you'd use to author/burn, and see if it plays on your dvdplayer.
Once you get the basics down, then you can move on to expirement with better quality/longer time conversions etc.....
The kvcd+ templates do a good job of retaining a lot of the original quality, but remember the outcome will depend on the source. Your avi may already be (compressed) lesser quality, than say a dv avi or an mjpg avi (i.o.w. a recently captured/recorded file), or not.
zTr