I tried a variation on your suggestion.
I exported a new m2v file using the mpeg-dvd from Premiere CS6 as you suggested with "Use Maximum Render Quality" checked to get better scaling from HD to SD. I imported it into my Blu-ray EncoreCS6 project by using the "Replace Asset" option and changed the "Project Settings" authoring Mode to "DVD" leaving the HD menu's "Aspect Ratio" at 16:9. I then built the disc using the "Build" tab DVD format and output settings.
The jaggies are gone (except for some motion jaggies) and the DVD plays well.
I suppose I could have done something similar within Encore but I'll test that some other time.