The Mpeg2 format covers a number of protocols. It can be used at a range of resolutions but is most commonly employed at PAL or NTSC SD or 1920x1080 HD as you describe. It is defined by the International Telecommunications Union as H262, an older standard than H264 and is less efficient. The two I believe are not compatible. Best to use an accepted preset, either for combined audio and video for local playback, or as seperate video and audio tracks for DVD/Blu-Ray mastering.
Thank you for both of your responses. I wasn't actually mixing up H264 and MPEG2 formats. I was just trying to export a composition as either one of them. But the H264 file is not playable. Still dunno why. And the MPEG2 format sets the file as 720x576. If I re-size the file, the frame rate is still not right; and I don't know how to adjust that. Combined with the audio problem I 'd mentioned on the other post, now I always have to use Premiere to import the composition, render it, and then export it to Media Decoder.
Short and to the point: You need to read up on the various MPEG specs and associated MPEG Levels. MPEG-2 (DVD) is different form MPEG-2 for HD TV/ BluRay and so on. Same for H.264. There is nothing wrong with AE you just need to make an effort to actually try and educate yourself here and based on that use the correct settings, even more so since in CS5 the program does not automatically match settings to the comp...