I often convert vob > mpeg not to make vcd but 'cos mpeg is a more portable format in players. I have tried some tools to convert directly to mpeg but the results were poor. Using dvd2avi and tmpeg as your guide suggests gives good results as does converting to avi then rendering to mpeg with a movie editor. Which of the two methods is preferred / is less lossy ie is creating a dvd2avi project file a lossy operation?
DVD2AVI projects are lossless because the D2V file is just an index that allows another program to read the VOBs. Saving as an AVI can be lossless as well, but it will take a ridiculous amount of space and take more time than using DVD2AVI.
