VCD Guide using TMPG
You will need the following software for this guide:
Creating a DVD2AVI Project
Launch DVD2AVI and load your VOB files.

If you load the first one, all the rest will load automaitcally. Now there's a VOB file that should called VTS_0X_0.VOB depending on how you ripped the movie. The X could be any number because for each movie it will be different, but you don't wan't to load a VOB file with the last digit being zero. This is the one you don't want to load because its the DVD menu screen and we don't want to encode that part.
Now we want to preview the movie to find out what type of video it is. Before you start make sure you set the field operation to none under the video tab. Then press F5 to preview the movie. You'll want to take not of two things here: Aspect Ratio and Frame Type. You'll need to know this later when you encode in TMPG.

Let the movie play for a bit and watch the statistics window. If the Video Type is around 95% and it displays FILM, then set the field operation to forced film under that video tab. If anything lower, or if the film type is NTSC you'll have to encode the movie at 29.97 fps. Also go to the color space submenu and select YUV 4:2:2.
If the frame rate shows 25 fps you have a PAL movie. Preview the movie first and see if the movie plays back ok without any glitches. If you see any glitches, set the field operation to swap - field. If that didn't work, change it to none and see what happens. If neither works, leave it as it is.
Now we have to demux the AC-3 audio. So go to the audio tab and select the track number you want to demux. You want to demux the maid audio track but to be sure of which track number it is, we can use IfoEdit to figure this out. So start the IfoEdit program and load the IFO file.

It will now display some information about the movie. As you can see in the above picture, it shows that Audio 1 is the English AC-3 audio track. So in this case, when you're selecting the audio track number, you would select track 1 to demux. If you want another language, simply select the track number for that language.
Now close IfoEdit and go back to DVD2AVI. Under the audio tab you want to select the appropriate track number. Then set the channel format to Dolby Digital and go to the Dolby Digital submenu and select demux.
Now all we have to do is save the project. So from the file tab, go to save project and save it.
Encoding Video
After creating your DVD2AVI project, you should have a d2v file. Start TMPG and load it as the video source.
Next we have to setup TMPG for VCD encoding so press the settings button.
Stream type should be MPEG-1 for VCD. Size should be 352 x 240 for NTSC or 352 x 288 for PAL movies. If you used forced film in DVD2AVI, then the frame rate should be set to 23.976 fps. If DVD2AVI showed the film type with anything lower than 95% or it showed your movie as NTSC, set the frame rate to 29.97 fps.
Rate control mode should be CBR at a bitrate of 1150 kbps. Motion search precision can be set to "Highest quality" for the best quality but it will take longer to encode.
Now press ok to close the window and press the "Encode" button to begin encoding your movie.
Encoding Audio
The audio is encoded separately using HeadAC3he to get the best sound possible with Dolby Pro Logic II surround sound. To do this, go to the AC3 to MP2 guide under the Audio section of this site. Just remember that the audio bitrate has to be 224 kbps to check the box (shown below) to resample the audio to 44.1 KHz.

Multiplexing Audio and Video
Start TMPGEnc and go to File>Mpeg Tools
Then go to the Basic Multiplex tab like the one shown below.

Select MPEG-1 Video CD as the type. Then select the video and audio to be multiplexed and choose where you want the output to be saved. The press Start and wait for it to finish.
When its done, you will need to cut the movie to make it fit on two or more CD's. You can use TMPGEnc to do this and the procedure is shown in the cutting mpg files guide on this site. Then use Nero to burn your mpg file as a VCD.