In case it could help someone…
I had to do something like this in the past and since I didn’t want to have to render the whole menu myself in Premiere, what I did is to create fake buttons with video thumbnail, got my videos in it, checked the Animate Buttons option and set the menu duration to the video duration. If I didn’t care about the fact that my video would then take space on the DVD and that an end user could click on it, say with a mous on a pc, I could have simply removed navigation to this button by doing it manually.
Since I did care about it, what I then did was to render the menu, copied it from the SourcesMenus (render as mpg). I then used this mpg as the video source for the motion menu and removed the dummy button.
But it is still really sad that the video replacement layer has not been included.