If you have transcode installed you can use avimerge to merge multiple avi files together: avimerge -o big.avi -i file1.avi file2.avi file3.avi
As for converting the avi to vcd, avidemux is a good program for this. It will allow you to convert the file, and choose the bit rate in order to ensure that the outputed file will fit on a cd or dvd (whichever you choose). I used this tutorial: http://forum.videohelp.com/viewtopic.php?t=242455 to convert some avi movies into dvd format. There is an option in the conversion dialog to convert to vcd.