It all depends on your source and target formats.
Virtualdub and its variants are excellent for dealing with .avi and mpeg1+2. Automkv is excellent for high def stuff. GordianKnot is a great front end gui for making XviD in an .avi container and other formats.
TmpgEnc Plus 2.524.63.181 is my encoder of choice when it comes to encoding to DVD MPEG-2. If you want to make progressive files out of interlaced without using a deinterlace filter, a solution with HQ results is to use the sharpen edge filter set to +127 for horizontal and -127 for vertical, with field base unchecked. Make sure non-interlace is chosen as the encode mode. Use bbMPEG (AVI2MPG2) then to multiplex audio and video.
If you want to get fancy with effects, transitions and the like, Adobe Premiere Pro CS4 is recommended. It can frameserve, like virtualdub can, to many other encoder softwares. There is a learning curve here though.
In Virtualdub or any variant, if you want to add additional files to one you have opened in it already, go to file | append avi segment. Even for the MPEG2 version of Vdub, the same.
Sound Forge 9.0e is good for editing and converting frequency for audio. Headac3he is good for making .wav from .ac3. ffMPEG used with ffMPEGGUI is good to encode .ac3 files.