Well, progressive frames do encode better than interlaced, however if you aren’t doing any downscaling (HD to SD), then the quality shouldn’t be too bad, especially at the bitrates you specified.
If you want to send me a sample segment of the DV AVI footage, I can encode it using a professional encoder (not Premiere), and you can compare the quality difference.
If you are interested, please send me an email (listed in the contact section of my website).
Jon Geddes
http://www.precomposed.com