Anytime I do encoding from the Vegas timeline, I almost always tweak the bitrate so that I get the best possible quality out of it.
You do this by clicking the Custom button next to the Template box.
You can select Best mode in the first tab that comes up.
Then click the Video tab and you get the other options you talked about.
BTW, if you do everything right (and use a bitrate calculator for longer than 70 min. projects, you’ll never need to do a “fit to disc”).
As far as 2 MPEG streams with different bitrates, yes you can.