Jana,
You can put each of the clips in its own timeline, link the button to the first timeline, set the “end action” of the first timeline to link to the second one and set the “end action” of that one to return to the menu.
But the transition from timeline #1 to #2 will not be seamless. Although the pause between the two will probably be shorter than in Encore’s preview, there will be a brief pause in playback. To make it look “natural” the break between the two clips should ideally be located somewhere where the video fades to and from black.
You could also try to join the two MPEG files with the help of the “MPEG Tools” in TMPGEnc. I don’t know whether or not TMPGEnc does this cleanly enough for DVD authoring purposes.
Btw: What application are you using to encode to MPEG-2 and what settings are you using?