Ok I am new to all this too, but at leat a reply will bump you up the list until somebody more knowledgeable comes along!
It sounds as if the file is saved in .avi format, which is how it has come from the camera. My understanding is that 1gb will be about 4 or 5 mins of video, which corresponds with your file size.
I think that in the process of burning the file is rendered into a different format (but this is where I get a bit lost), and I think Nero is telling you that even in the changed format the file is still too large.
I am not sure if this helps, but I think Nero has quite extensive help files and they may through more light on this for you.