XVID? Theres your problem right there. Vegas doesn't like XVID for some reason. There is some workarounds to get Vegas to accept it and some programs/codecs installed can cause Vegas to accept it so it looks like you had something installed on your system previously that allowed Vegas to accept it. I've never been able to get Veags to import XVID or DIVX.
But i've got to ask, why did you use such a lossy codec as XVID to rip your DVD's and work with for your project? I don't care what anyone says about XVIDs being as good quality as DVDs because that is just not true. And it has nothing to do with not knowing how to encode an xvid either. You want to work with a lossless codec like lagarith or you will suffer compression issues when converting to DVD, especially with such a long movie. You could also just have ripped the DVD's without encoding and imported the VOB file (with no file splitting or audio track) into Vegas and that would remove the 2:3 pulldown.
Here's a workaround to your project issues you mentioned and it will give you much better final results. Re-rip the DVD's to 23.976 (2:3 pulldown removal) using a lossless codec. Save them in a new folder. Now once this is done open up your project in Vegas. ignore the missing files warning and search box that will appear if you have deleted any of your original files. Go to the "project media" tab and right click on your first movie file and select "replace" and replace it with the new rip for that movie, then do the same with each other file. Now you may have a small problem with your AOTC footage being a few frames out due to the framerate issues. But this will save you a lot of work. But make sure you have plenty of hard drive space.
Don't use Vegas's Mpeg encoder to encode such a long movie because its pretty crap with low bitrates. Use procoder as this produces amazing results for low bitrates. You would be able to use the DVD-5 Mpeg2 settings i created for procoder that i used for the DVD-5 of Revisited which would let you squeeze up to about 4 hours onto a DVD-9 with very good results.