You want DVD ISO. A "proper" DVD uses MPEG2 - so MP4 will not be playable on "DVD only" players, where a DVD ISO will.
I don't believe you can make a call as to which will provide better performance. MP4 will typically make much smaller files (or better quality video) for the same file size, although 480p is not a very big standard. That said, if you don't have that much content you can proabably get similar quality images out of each format, ie if you have way less then 1 disks worth of information at ISO DVD quality and you increase the bit rate (if its an option), you can land up with just as high a quality output - the only disadvantage will be working with larger files and thus longer disk burn times.
I'm only about 90% sure, but there probably won't be any difference in audio quality - although to some degree it depends on how the audio is encoded. I Believe both MP4 and DVD can use AAC audio, in which case the quality could be the same. I suspect that if your source files are MP3 you might be able to get marginally better quality from an MP4 as it mp4's can probably just use the raw MP3 audio without transcoding, so no quality loss. You can partially compensate for this with higher bitrates if you need to transcode the audio and are not constrained by the size of the disk.