Basically, if it is a protected DVD, rip it using DVD Decrypter. If it is not, or when you have ripped it, open the files in DVD Author, turn off menus and edit the clip to get just what you want. Finally, point DVD2AVI at the files that DVD Author creates and save it as an AVI.
If you want to play around with the avi to resize it, crop it etc, use Virtualdub
You might want to get some codecs as well - DIVX or XVID are the most popular. WM9 is a very good generic one but Microsoft had a hissy fit and made Virtualdub take it support for it so you'll need to track down version 1.4 or older if you want a Microsoft Codec.