You have to understand that DVD/MPEG2 is a HIGH QUALITY format. So filesizes are INTENTIONALLY that large in order to give best quality. Of course you can use higher compression, but then quality suffers. In any case DVD will NEVER look as good as a DivX on the same filesize, as it is an OLDER standard.
You'll have to decide for yourself which quality is acceptable for you (just view the videos at different settings), but personally I'd not try the one DVD approach (unless maybe with a Dual Layered one).
As far as one file at a time and TMPEGenc goes, that is not true. Just click on "do not start encoding immediately" at the end of the wizard and que up more files.
PS: Regarding Video CDs: Those are supposed to carry 1 hour of video at VHS quality (so it will be quite poor), one episode will be about 300MB in this MPEG1 format. SVCDs are higher quality, one episode per disk then ~500 MB IIRC.
Again DVD files will be larger then either usually...