You can’t do it directly in an MPEG-2 conversion. You need to convert it to PAL first.
Make an uncompressed or Pro Res Quicktime first, as Rafael said, using the appropriate preset in the Advanced Format Conversion folder. Make sure you turn on the Frame Controls and select Better or Best in the resizing and retiming sections. This will make sure you get the cleanest conversion. If you don’t do this step you will get a quick and dirty conversion which may not look great. Turning on the Frame Controls will greatly increase the encoding time…be prepared for a very long render.
Another option is purchasing the Standards Converter plug in from Graeme Nattress (www.nattress.com). The quality is good, though not as pristine as Compressor using optical flow (higher quality settings in Frame Controls). It is much much faster and works with in FCP.
Before you do any of this, find out if you really need a true PAL DVD. Most PAL DVD Players and TV’s in Europe can handle an NTSC DVD just fine. The same is not true of NTSC DVD players and TV’s in the USA. They rarely can play PAL DVD’s.