If you select 4GB DVD, it should correctly produce a 4GB size image. It gives you a very off the mark estimate as you add content to the disc, and you can't rely on it. Using iDVD as an example, it doesn't create a file that's too big. It will warn you if you are over, not say this is ok, you are within the limit, then give you something you can't use. iDVD has other issues, but at least it accurately says what will fit and what won't.
Compress-to-Fit should do just that, compress as needed to fit the desired disc. But it doesn't. Again, it often creates something that is too bit to fit. If I use compress-to-fit and it asks for single or dual-layer, then I expect the end result to fit whichever I chose.