The question: Pinnacle allows export in "dvd quality mpeg 2"" Would that mean i can export in this format and add menues using another dvd authoring app instead of having to burn my dvd from within pinnacle? The question concerns the quality of the mpeg 2 file ....

Yes, you can export MPEG2 with a basic set of MPEG2 compression parameters. Much DVD quality has to do not only with the bitrate but also with the quality of the MPEG2 encoder.
The Pinnacle coder produces good video, but I have read that other encoders do a better job. So far, in my casual comparison
of TMPGEnc (a well-rated MPEG2 encoder) and Vegas Video (the top-rated Main Concept encoder), I have not noticed much of a difference for the material and higher bitrates (8000 mbps) I am using.

Thanks Gints. That's what i am getting at, is trying to encode a liquid Edition project outside of the LE coding engine.

My results with taking an avi. output from Studio 8 and using Canopus encode have given me much better streaming results - i am trying to figure out how i can encode a dvd project outside of LE but still have the nice pinnacle menus with video in the buttons etc. ....