Just posting an FYI in case someone else runs into this issue in the future. Disclaimer: I don't know if the issue is PP or my footage or both. I have some SD type 1 AVI files that came off a miniDV camcorder captured with VideoStudio. I have discovered a couple of problems:
First, if I create a sequence in PP based on the clip, the sequence is created as progressive. Mousing over the clip doesn't show "i" or "p" in the information. Modify -> Interpret does show interlaced, but the field dominance is shown as "Unknown".
Second, and a long story here, but when I put a sample clip x 2 in a 1080i sequence and output using the H.264 BD presents to a muxed .m2t file. The first clip was left-as with pillar bars and it looked ok I guess. But selecting scale to frame size on the second clip looked really bad. Then I took the same clip and converted it to type 2 AVI using the freeware tool DVDate, then did the same 1080i experiment. The pillar bar version was noticeably smoother and the scale to frame size was way better. Point being just altering the type from 1 to 2 had drastically different results in this export case.
(PS In case of confusion, anyone who was following my other post about the SD on DVD vs. 1080i sequence experiment ... I used the type 2 footage.)