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I'm sure others will add additional comments, but here's the workflow for Standard Definition for playing in the DVD-Video format.
PE will convert internally to DV-AVI as this is it's default workflow for editing.
When a Burn-to-Disc or Burn-to-Folder is the output, during the transcoding and Burn phase, it will again be transformed back to a DVD-Video format (Mpeg) for playing on a DVD set top player.
There's no way of getting around this, it is, what it is...
The problem is that MPEG-2 files are not Intra-Frame, i.e. they are GOP (Group of Pictures), so that there is only one full Frame for about every 15-18 "frames" that only record the differences between each I-Frame. PrE is based on DV-AVI which contains all Frames, and not just difference Frames. This is what your MPEG-2 source footage is "converted" to, so that one can edit on a Frame-by-Frame basis. Then, when done, if you are Exporting to DVD-Video, these "internally converted" DV-AVI's must be re-Transcoded to MPEG-2 - again.
Some NLE's do offer "smart Rendering," where all unchanged GOP sections are NOT re-Transcoded. One of these would be a better choice when one has MPEG-2 source material and wishes to Export to DVD-Video. Unfortunately, neither PrE, nor PrPro, offers smart Rendering. For use with either, one is best served by not using any GOP format.
Here is a little example of GOP vs I-Frame footage:
Probably the best summary of GOP is Jim Taylor's (one of the "fathers" of DVD-Video) "Birds on a Telephone Line." Basically, it goes: one is talking to a friend on the telephone and describes the birds outside of a window. The full description of the birds in the tree contains all of the info to explain to the person on the other end of the line, exactly what is being seen in full detail. One of the birds moves, but the full details are not given, only that one bird has moved - this is that "difference-frame." And so it goes, until the scene changes dramatically, then the full details are once again given, followed by only the new "difference-frames." *
* Heavily paraphrased from DVD Demystified, by Jim Taylor.