4000+kbps is not insane when you have 4.3gb available space on a DVD-R, plus the higher the bitrate the less compression (the source video is 30gb remember) and smaller blocks used to compress the frames, especially important when you're going to view the video on a 5 foot wide screen where any compression artefacts stick out like a sore thumb.

As for AC3, I tried comparing a clip of video with AC3 and then wav and the only difference I noticed was that the AC3 audio was slightly quieter but nothing significant.

The XviD file has now been created and I muxed the AC3 with it but oddly my media player crashes when you try to skip to any part of the video, so I re-encoded the audio as 256kbps mp3 using VirtualDub and there's zero problems with skipping to any part of the video. Plus there's good news for W95/W98 users, the final file came out at 4.02gb so I re-compressed the end credits slightly smaller, the full resulting file is now 3.99gb and plays fine on my Win98 PC. Now to do the subtitles...