I'm still not 100% sure I understand what you're trying to do, but here's a bit of background info that might at least be helpful (and by the way, 10.2 and earlier can't read VCDs; 10.3 can):
The .dat files on VCDs are indeed the video, and they do contain an MPEG1 stream of data, but they are NOT just .mpg files. They are an .mpg file with some extra data in there (I believe for error correction), and although Quicktime can play .dat files without changes, it seems to prefer .mpg files and if you're working with them, real .mpg files are accepted by more programs.
If you want to just play a VCD, and are using 10.3, just open the .dat file off the disc from QT player, or tell QT Player that it all .dat files belong to it--then you can just double-click one to play it. Works great.
To convert a .dat to a .mpg, the easiest thing is to process it with an app called VCDGear; nobody doing anything do VCDs should be without it. You can also ask it to fix broken spots in the file while it's at it, which are surprisingly common--I've seen many VCDs that stick in QT Player but work fine after VCDGear cleans them up.
To copy a .dat to your hard drive, you again need 10.3, but can just drag the file using the finder. 10.2 and earlier couldn't properly read VCDs, which is is think the error you're getting--it just plain wouldn't work (I was so happy to see this fixed in 10.3--worth the price of admission right there). There was a shareware app that could read VCDs under 10.2, but I can't remember what it was called. Anybody?
As for combining .mpgs from two VCDs onto a DVD (at least, one that can play on a TV), I'm not sure; Toast should be able to do something like that, or if you can get the two to import into iMovie you can use iDVD to burn a disc, but that's all I can think of.
.bin and .cue files I believe are only for people making "images" of VCDs; I don't think you'll find those on actual VCD discs.
