Try using TMPG Editor. Select your avi for both video source and audio source. Load in the mpeg settings (vcd pal, svcd etc) Under settings you could select motion search presicion to normal instead of high quality, this will speed things up a bit but the quality will not be as good. Choose an output filename and click start.
There are no shortcuts really when doing these kind of conversions and they always take time. However I think that 12 hours for 128mb is well over the top. We are looking for something in the region of around 4 to 6 hours for a 600 to 700 mb file. This will depend on your system capabilities.
TmpgEditor is widely available from lots of sites. If you cant get it then obtain it from my site.
when i am trying to convert some avi's using TMPGEnc i get an error reading cannot open or unsupported has anyone any clues on over coming this problem.