It's not possible in Premiere Elements. Sorry.
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Welcome to the forum.
The only way, that I can think of, to get the interactivity, that you describe, would be to create a BD (Blu-ray Disc), but instead of an iPod, you would need a portable BD player for the disc.
I have not encountered any file format that has interactivity and navigation on its own. Now, perhaps with an XML companion file, or some sort, the metadata could be read by the right program, but I have not encountered such. I have video iPods, but have never seen such navigation in any file, however I do not download much video content from iTunes, so certainly do not know all that is available. If you have such files, maybe with a bit of poking around, you could reverse-engineer how it works.
Perhaps post to the iPod forums, and inquire on how this is done by others, and what software they use. Please post any findings to this thread, as it will certainly educate me, and will likely help others.
Thanks guys. I ended up just googling it there are actually quite a few programs that will add in chapter markers. I'm going to try some of those and see how they work.