Can you download the utility GSpot Codec Information Appliance and analyse your mpeg file with it. Then post a screen capture here. Your Jpeg files should be no more than 1,000 x 750 pixels. If they are more then you should resize them.
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Further Neale's suggestion, you'll be best converting the MPEGs to DV-AVIs before you bringing them into a Premiere Elements project. It will save you a lot of heartache in the long run.
As for output, I recommend you just output a standard DVD. Although DVDs are just TV resolution, they'll still give you plenty of resolution for a good projector image -- and they're universal enough that it won't be hard to find a laptop or player that can play them.
Exactly how will the signal be fed to the projector, i.e. from a DVD-Video in a DVD player, through a laptop, etc.? Will you have to provide the AV file to a laptop, other than one that you use, such as an unknown laptop at a conference?
The exact delivery scheme and the mechanics of this can dictate a lot. That, and the questions that Neale asked. If your MPEG is say DVD-Video resolution, there is nothing to be gained by going HD, as it will be SD and will determine the resultant quality. It will also dictate your Project Preset. You can then Scale your JPEG's to match that.