Yes. DVDSTP convert it in a 720×480. But you have no control of this process.
You don’t know where the interlacing problem come from.
I recommend you export from FC a standard NTSC movie and watch it in an interlaced monitor.
Is the only way to make sure that the rendering have been properly done and to avoid surprises when printing the DVD.
You have use a size (854×480) that is OK for Photoshop, because is based in Square pixels.
The 854×480 Square pixels movie have the correct aspect, but in the end must be converted in a 720×480 DV NTSC Anamorphic pixels movie. You must avoid this conversion. Is like adding an extra rendering in the end that won’t benefit your movie at all.
Make your graphics in PH (854×480) and bring them to any AE composition or FC sequence with 720×480 DV Anamorphic. They will fit.
In the end you will get a standard NTSC Anamorphic movie that only needs to be transcoded to MPG-2.
Mac OX 10.5.2-FC 6.02-QT 7.4.1
G5 2x2Gh 4GbRAM-BlackMagic Extreme
PMBP 17″Core2Duo 4GbRAM-AJA ioHD
JVC DTV-17″
SONY EX-1 . SONY PD170
..and always a big mess on top of the table.