Rozanne,
Question: Is the file not showing up in DVDSP or is it there and just will not play?
You should check to see if your “compressed” video file compressed properly by opening that .m2v in Quicktime. It should play the video (minus the audio). If you look at the QT movie inspector the Format should be: MPEG2 Video, 640 X 480 pixels.
If the video file is working fine in QT then it should work in DVDSP.