Encore Menu resolution

[numbskullvp]

Does anybody use Adobe Encore along with Photoshop to create their DVD menu structure?
I'm having issues with not the creation of the DVD menu's but the resolution in which they turn out in.
When I export my project out to DVD and play it on my TV it looks horrible. I am using the suggested 720X536 STD NTSC DV/DVD template at the preset of 72px resolution. (Which is what the menu's that Encore comes with are also set as.)
I do notice that this blur or pixelating effect on the menu only occurs after adding live video to the menu. Now I have been trying to add the live video to a menu button not the entire background could this be my issue? I shouldn't think so since I have done these before on a previous project and have not cause this issue. Or is it maybe the live video file that is throwing of my menu resolution? Is there a proffered file or transcode that Encore likes better then the other? I do believe the live video I am importing is 720X486 D1,DV (0.9). It only will import several resolutions of live video so it seems rather limited in the choices I have. I have also tried shrinking the live video resolution 85% in affter effects with a black boarder/buffer to keep the 720X486 resolution and export that out to an AVI with the same results in Encore.
Any help would be appreciated.