ffdshow is a set of directshow decoder filters, it is used to decode the input file you feed into AVStoDVD. Then AVStoDVD will encode it (thru QuEnc or HCenc) to MPEG2-DVD standard.
The choice to use (or not) ffdshow is yours. You should base your decision upon visual yield and decoding capability.
BTW, if you decide that ffdshow is your choice, I suggest you to answer "always" when ffdshow pops up.
Bye