Peter,
to create a BD and a DVD should be done in different projects and differently encoded assets.
I would never use a H264-file as source for SD-DVD, as it´s highly compressed material. for your SD-DVD you should do a 2nd encoding using a SD-MPEG2-setting.
best result will be if you will scale-down your HD-video prior encoding.
accoding to your default-sqeeze-setting: it makes NO sence to deinterlace MPEG2-video if it is interlaced source, as you´ll loose motion-sharpness on the video. you should allways encode interlaced video interlaced with same field-dominance as the source.
in your case if your source is HD it should be upper field first. PAL mostly is upper first, only all DV-videos (DV, DVCAM, DVC-PRO) use lower first.
better keep that in mind.
cheers
danny