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Converting or compressing AVCHD files, plus best DVD maker

#1
Hello there. I've recently undertaken the task of converting a load of old family home movies on 8mm film to digital. For this task I used my Canon HF100 digital camcorder, which shoots high definition in .m2ts format, otherwise known as AVCHD.

I shot them in the highest resolution, and all together the video files now add up to over 12gb.

Now I wish to burn them to DVD, but of course even DL DVD's aren't of a large enough capacity to store 12gb, so I now have the problem of how to compress the files.

My question, then, is what freely available software is out there that will do this, or alternatively convert them to an easier format to handle such as avi or mkv?

Finally, what is the best freeware/shareware programme out there to edit and create a DVD with menues that will play on a standard DVD player? Now obviously, it has to support .m2ts format. The software that comes with the camera ImageMixer 3, is woefully inadequate for this purpose.
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