VirtualDub is a cool program to capture video from (considering you use a great codec) and edit a video in every way you can think of (you could download different types of great filters out there). Its the best AVI program out there!
Now for MPEG, I would have to say the best program would be TMPGEnc, thats the best MPEG program I can think of, you could edit MPEG, MPEG2 (and others including AVI), It can edit mpeg video files and output them as they are and can do other lots of stuff too!
Go to
http://www.vcdhelp.com/ to learn everything you want to learn about VCD's and MORE!