Just to confuse the issue here, but up to 8 channel LPCM is, in fact, supported by the DVD-Video specifications. It was just never implemented in any player or authoring package though as the bitrate was a maximum of 6.144Mb/sec, leaving very little for Video. It was assumed that nobody would bother, so it got left out in the final implementation.
The DD encoder in Premiere is the finest you will ever see for the money it costs, plus it is fully logo compliant with Dolby Labs, allowing you to use the DD logo on the final disc subject to approval of the encoded stream by Dolby Labs and a signed TMA agreement.
For higher quality, you may also wish to consider the benefits of DTS audio. The encoder as a standalone from SurCode will cost you $500, but is well worth the money.
The quality jump is clearly audible.