Adjust the encoding settings
Now, click the Setting button from the right-bottom corner of the TMPGEnc's main window. This pops up a new window that allows you to modify the encoding settings. From the Video tab, leave everything else intact, but change the Motion search precision setting to Highest quality (very slow) in order to minimize the quality-drop in re-encoding.
From the Advanced tab, set the Video source type to be Non-interlaced (progressive) as normally the deinterlacing has been done to the encoded AVI already if necessary. Change the Source aspect ratio to be 1:1 (VGA) and set the Video arrange Method to Full screen (keep aspect ratio). Leave all the boxes in the bottom part unchecked.
Close the window by clicking OK.
Preview to check the subtitles
Now, go to File menu and select Preview... This opens a new window that allows you to preview the video how it will look like after your modifications. It is also important to check whether the subtitles are visible at this point -- if they're not, check your subtitle filter's settings and make sure it works correctly (try opening the video with Windows Media Player -- if the subtitles play on it without turning them on anywhere, the problem is probably that you didn't remember to make the DirectShow Multimedia File Reader to be the top priority filter in the filter list in TMPGEnc).
If everything looks OK, simply close the preview window.
Change in the Output file name field the filename and directory you wish to use for the resulting MPEG-1 file and then simply hit the Start button in the top-left corner and wait for couple of hours (might take much longer if your computer is slightly slower) for encoder to finish the video encoding part.
Multiplex the audio to video (optional)
Now, if you had a separate audio file, you need to join the video and audio files together. This process is called multiplexing. Go to TMPGEnc's File menu and select MPEG Tools... In Simple Multiplex tab, change the Type to MPEG-1 Video-CD.
Next, click the Browse button next to Video input dialog and select your video file you just encoded with TMPGEnc. After you've done that, click the Browse button next to Audio input dialog and select the .mp2 file you created earlier with BeSliced. Finally, change the filename and directory to the Output to whatever you want, but remember that this destination has to have appx. 1.5GB of free space, because it actually copies the audio and video files into one and puts the resulting .mpg file into this directory. After you've done this, click Run.
After a short while, you will have a finished VCD-compliant .mpg file :-)
Written by: Petteri Pyyny