I asked this in techy questions. I haven't found a free thing to do the whole schebang in one step. However I found that you can make a DVD image on your hard drive, then once there use handbrake (free) to transcode the files to something to stream around the home network. Handbrake doesn't do AVI though due to the codec being licenced and they are free ware only.
I use DLNA and AVI streams well from my NAS to TV. MP4 with the right settings does too.
PS - transcode audio to Dolby Pro Logic II if you want surround sound. Most TVs will not pass-through 5.1 and down mix to strereo (losing the surround) so if you rip to Dolby PL II (essentially an analogue way of doing surround) you retain surround sound.
You may find it quicker to download the file you want though.......