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There is a limit to the amount of content that can be put on a DVD. THe average single layer DVD holds about 4.7 GB of Data. That will hold about 2 hours of video content depending on the quality of the MPEG-2 video.
To export an MPEG-2 file in Premiere Pro CS3:
1-File>Export>Adobe Media Encoder
2-Choose MPEG-2 DVD as the format. This will produce a separate video (M2T) and audio (Wav) file.
3-In Encore import both clips, create a new time line and add them to it.
Just a note: the format of a video file has nothing to do with the quality, it is the codec that is used to compress that effects the quality. Some WMV files will produce a better result than the older MPEG-2 standard.
Premiere Pro CS3 can’t author a DVD anymore, it could up until PP2.0 but they removed that ability in the CS3 version when they started offering Encore with it for free.