hi dave,
YOU ARE GOING A WRONG WAY!
h264 is no part of DVD-spec. you need to export/transcode your stuff to MPEG2 SD.
as you´ve created h264, they will all betranscoded within encore to MPEG2, so you are cascading transcodes. that´s the reason why your picture-quality get lost on the one hand.
on the other hand your footage/film might be HD, but DVD is SD only, so you might be irritated by the low quality of SD as well.
another problem might be field-domionance – if you have an original interlaced HD-film the field-dominance is upper first, but SD NTSC has lower filed first, this will cause a wrong field-dominance, so you need to set a field-shift-filter.
I would advice to encode the assets prior authoring.
cheers
danny