"VCD" (Video CD) is a very specific MPeG video format that requires special software to produce, and I suspect Nero isn't up to the job.

Assuming your DVD player can read VCD's (most U.S. players can not. It's more common in Asia), you need a good AVI-to-MPG converter such as "TMPG" by Tsunami. Not hard to use, but not for the novice either.

Once you've converted the AVI to MPG, try an excellent shareware program called "VCD Gear". It will automatically convert the MPG to VCD format, with the files necessary for your player to recognize it as a VCD. You can then burn the files to CD using Nero just as you would any other standard CD "Data" disc. That should do the trick.