If you are rendering to MPEG-2 (Render As dialog), then you need to first choose a template (I recommend the DVD Architect templates). Next, click on the Custom button in the Render As dialog. There, on the Video tab, you can set the Average Bitrate for the MPEG-2 render. Smaller bitrates will result in smaller file sizes. You will start to see some degradation in quality as you go below 6,000,000 bps average. By the time you get to 4,000,000, the quality drop will be more noticeable.
You can use this calculator to figure out how much video can fit on a single DVD at a given bitrate:
I think I got it OK, I needed to change the bitrate. I started with several mpeg clips sewn together, then took 10 second clips out of the full movie and encoded them to mpeg1. The bitrate set as default was huge, so I reduced it until I got a quality clip compressed to the size I needed.