Is there a particular reason why you want to break up the movie and have it span several VCDs? To put it another way, you could Rip the movie from the DVD convert it to a movie file small enough to fit on a single VCD, and then make your VCD... if you were so inclined.
It's not so much a matter of converting the original movie to an AVI. The original movie on the DVD is actually in MPEG-2 format on the disc. Yep. Those VOB files on the disc are really just MPG files. You could open them with an MPG editor, edit them, and save them locally if you wanted, without any conversion at all. VCDs use the older MPEG-1 format. So, in the end, you are going to have to convert from MPEG-2 to MPEG-1. Not THAT much of a big deal, actually. But adding a ton of steps in between will just really affect the quality of the end result.
THAT said... there are a number of easily available tools to convert a DVD to VCD. Videohelp.com is your friend in this case. Tutorials, links to software with explanations, etc.