When you’re previewing it, is the preview window set to Preview (Auto)?
If so, this would definitely account for the poor quality. This is the default to allow for (as close as possible to ) real-time preview.
Setting this to Best (Full) will show you close to what it’ll actually look like. A number of factors (such as processor speed & the number of FX involved) may severly limit the ability to do full-speed full-motion preview.
Aspect ratio is only a concern if you shot or want to render in 16:9. I’ll leave that subject alone for now.
As far as DVD settings, here are recommendations based on numerous posts here and elsewhere. You didn’t say so I’m assuming NTSC. Replace with PAL if necessary.
Audio portion render: select Dolby Digital AC3 in the “Save as type” window. The default template is fine for now.
Video portion render: select MainConcept MPEG-2 in the “Save as type” window and “DVD Architect NTSC video stream” in the “Template” window.
Render both files to a folder on your hard drive somewhere and you’re ready to create a DVD. You didn’t say if you had DVD Architect or not so I’ll stop here.
Edward Troxel (one of the moderators) has an excellent series of newsletters on his site. I encourage you to download and read through all of them as they contain valuable tips on all aspects of editing, rendering and DVD creation.
Feel free to come back here anytime and ask questions. I know you’ll find this to be a friendly and helpful group of folks.