To add video in X2D, you need to select File -> Add Video file. After adding the file(s), X2D will show menu and video details in main window. In menu details you can use your custom background image if you want to. Other options should be pretty self-explanatory.

I used one of my x264 encodes as an example and as you can see, ConvertXtoDVD reads the chapters from my file. In video details you can check off the audio streams you don't want to keep.

If you have an AVI file with separate subtitles you can add them in your DVD video, right click the on the subtitles and select Add Subtitle channel. Note that X2D supports STR subtitles and SUB & IDX combination. X2D automatically inserts the subtitles to your project if the name of the subtitle file is the same as the video file's name. For example, if you have a video file called my_video.AVI, your subtitle's file name has to be my_video.SRT. You can also add custom chapter point the same way, just right click on Chapters and choose Add Chapter.

That's pretty much everything you need to do. Just hit button to start the conversion.