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I have heard reports of this issue specifically with MPEG2 footage, but I don't have the issue here. I'll test again, though, just to be sure. I think it's isolated to certain system configurations.
By way of comparison, the same systems that have horribly long MPEG2 DVD encoding times have perfectly normal encoding times using other destination formats. Is that the case with you too, Colin?
That's precisely what I'm discovering. Using the same sequence and same footage, going to something else like DV AVI or to H.264, for example, is comparatively much faster. What I stumbled upon was a way to "jar" AME into processing MPEG-2 much faster when using these sources, though it's still a little flaky. In any event, encoding is several orders of magnitude faster.
I need to do a serious test, and make sure it's not just a fluke. Incidentally, were these reports of people using 4.0.1 or 4.0.2?
The issue does not occur here; I just confirmed it.
You may want to try disabling "Include Source XMP Metadata" in the AME settings wing/flyout menu to see if that improves encoding speed.