DVD Shrink is made to "shrink" commercial release DVDs by reducing the overhead often found on studio-made discs. The fast re-quantization/transcode method used for this process is fairly abusive, but since it's primarily reducing overhead alone, it's fine.
Some commercial DVDs, specifically well-packed TV show releases, cannot be shrunk without looking really crappy afterwards. There is no overhead.
The same is true of homemade DVDs, from your own captures. You have no overhead. All of your bits are needed on that disc. Using DVD Shrink on a homemade disc is very abusive, and the quality torpedos quickly. Very often you're left with blocky video full of noise. DO NOT USE DVD SHRINK ON HOME-RECORDED CONTENT.
You can reduce the size of the AC3 to a lower bitrate. Standard choices are 192, 224, 256, 384, and 448k. Just try to move down one setting from what you're using now. You may take a quality hit from this, but it really depends on the quality of the source audio. This can be done in any AC3 encoder, and we've discussed them here before on the forum. For example, see
http://www.digitalfaq.com/forum/show...-ac3-1465.html