Try the technique I suggested.
1. Select video format as you normally would.
2. Put the video in (drag & drop or using the Add button.)
3. Select DVD-Video as output in advanced window. Select Pal or Ntsc as required.
4. Hold down both apple & D keys (or go to file menu & select Save as Disc Image.
5. Then wait for the conversion & disk image creation.
6. Go to finder & look at size of file.
7. In Toast press Copy tab & in advanced window select Image File. Drag & drop or press select to find your image file.
8. Put disk in & press burn button.

Toast makes its own calculations on any necessary conversions from avi to mpeg2 & any settings you've made.

Compression? An avi is generally already compressed. You said your avi is 701.2 MB & runs for 101 mins. That is already highly compressed. Toast will try to make full use of the space on the dvd. So the more you fit onto the dvd the lesser the quality. (If you already have an mpeg 2 file though that's apparently a different kettle of fish.)