Nero is just being honest with you. As you said, you encoded the file as VBR, which cannot be used to create a standard-compliant VideoCD. (A legal VCD must use exactly the same constant bit-rate as a conventional audio disc, no deviation whatsoever.)

If you don't expect to play the disc on an old stand-alone VCD player, go ahead and create a non-compliant disc. Because DVDs are VBR, many DVD players can handle non-standard VBR VideoCD's just fine. But since a VBR disc is not strictly compliant, there's a risk that some players may reject it. Try it and see if it works for you.