Automatic Transcoding is CBR until the required bit rate drops below about 6 Mbps. Then VBR transcoding kicks in. I think that it’s VBR 1-Pass at that point, but I’ve heard others speculate that it’s VBR 2-Pass. Adobe’s not telling.
You could do your own test: Time how long it takes a 100-minute file to transcode in Encore using a VBR 1-Pass, 5.7 Mbps transcode setting. Then, in a DVD-5 project, time how long it takes to transcode that same file in an Encore timeline and with a transcode setting of Automatic. If they take about the same amount of time, then Auto uses VBR, 1-Pass. If Auto takes twice as long, then it uses VBR 2-Pass.
Make sure the audio is transcoded to 192 kbps Dolby Digital.
Automatic Transcoding will respect progressive sources.
-Jeff
The Focal Easy Guide to Adobe Encore DVD 2.0