On a DVD, yes it's definitely possible. Read for instance this thread, to start :
http://www.kvcd.net/forum/viewtopic....asc&highlight=
Then just lurk on the different sections of the forum, and ask if you need more advices. What you need is : avisynth and a good script, an encoder (HCenc or Tmpgenc for instance), beswett for the audio, and an authoring tool of your choice (DVDLab is the best choice).
On a CD it's theorically possible also but we can't speak about "good picture quality" then, so probably not the better thing to do to start with KVCD.