What you are observing is common when the source video is .mod widescreen (MPEG2.mod). But, you say that your source is 720 x 576 MPEG2.vob (presumed ripped from DVD-VIDEO on DVD disc). If that is correct, is the DVD video file standard or widescreen?
Continuing on that line of thought
1. What program created the file on the DVD disc?
2. Do you have the DVD disc with the DVD-VIDEO format on it?
3. Do you get the same result if you
a. put the disc in the burner tray
b. open Premiere Elements 14 to the Expert workspace, select Add Media/"DVD camera or computer drive"/Video Importer/ and use its Get Media to bring the VTS_01_1.VOB to the project's Timeline?
c. if you right click the file's thumbnail in Project Assets and select Properties, is the frame size 720 x 576 or 540 x 576?
I have gone through the above and have had no problems, getting the expected frame size and the project automatically setting the correct project preset.
Please consider and give more details, especially about the details of the file that you have presenting as 540 x 676.
Any questions or need clarification on the above, please do not hesitate to ask.