What is the Bit-Rate of that "draft quality" MPEG-2 Export?
For down-rezzing HD to SD, Jeff Bellune's TUTORIAL might help get the highest quality, and also give you tips on fitting that MPEG-2 onto a DVD-5. Two hours should fit fine, with good quality.
Use Dynamic Link and see if Encore can figure it out to get it on dvd.
If not you will have to shorten your timeline.