Hi,

you'll need VOB files in the end anyway, so I wouldn't recommend re-encoding VOBs into another MPG-Format. I use Ulead DVD Factory a lot, it's not top-of-the-pops but it allows for easy menu creation and importing of all kinds of videos. If you just want to combine several small VOBs into one DVD and don't care about menus for the moment, DVD Shrink does a good job at that. Simple to use, quick and reliant.
Hope it helps.

Cheers.