No.
The reason is that the format of a VCD is fixed, and you cannot deviate from that format. There are some DVD players that will play Divx movies, and that would give you the quality you desire, but a VCD will always look like crap, and there isn't much you can do about that. Even SVCDs aren't that great.
Anyways, Nero actually made you a VCD, which is a far cry from a CD with a 700MB file burned on it. That's what the extra files are for, and that's why it was reduced to a 650MB MPEG1.