Nero Essentials won't convert avi to DVD, you need the full, full price version of Nero 8 to do that with the video plug-ins.
And you have to activate Nero 8 online as well now
I don't know of any freebies, sorry. I use Nero 8 for that.
For general file conversion and DVD to DivX I use a couple of (paid for) Imtoo software programs.
You could take a look at a site named Doom9 which has lots of freeware video conversion programs, but they're often complicated to use.