After reading more posts and playing around I figured it out. The key to adding video to a menu is this:
In Encore CS5, start with a menu template > right click > Edit in Photoshop
In Photoshop: in the Layers pane you’ll see at the bottom “Background” with a lock. This must be clicked on. (Encore inserts the video here so you will not see this “background” layer. The buttons and any other layer you have will be on top of the video). Adjust the buttons and Layers located above the background as needed then click > File > Save
Go back to Encore. The menu will be black except for the button font.
Right click in Project Panel > Import As Asset > choose your video and audio > click the menu > in the Properties pane click the Motion tab > pick whip the empty Video button to the video asset in the Project pane > then pick whip the empty audio button to the audio asset in the Project pane.
After everything is complete with all motion menus click > File > Render > Motion Menus.
This will render the video to the menu. When you click the Preview icon you will see your menu with the video playing.
This is for DVD setting – I have not tried this with Blu-ray yet.