DSP does not reconvert your media to MPEG2 when you add buttons over footage that is already compressed.
On a side note. I’ve seen many students make a similar mistake as yours, which might not be a compression issue. Sometimes it’s as simple as forgetting to properly set your colors up for your buttons and overlays.
For some reason, DSP defaults to a semi transparent white overlay for your button colors. It looks as if it is washing out the menus. i.e., a solid black screen will look gray. The best part is, if you don’t have the button state selected which is causing it, you won’t see it.
Highlight your main menu in the project outline window, then check your inspector’s color tab. Click through the button states and look at the sliders.
If you see the top slider set in the middle, I believe with a setting of 7, it is basically overlaying a white layer set to 50% transparency over your entire menu, not just your buttons. Drag the slider back to 0.
This may or may not be your problem. Like I said, I’ve had people come to me with the same issue time and again, and 80% of the time, that’s why.