I'm about to make a DVD title which consists of about 12 different "episodes". All of these will be separate mpeg2-files.

What I'm planning to do is to have playlists on a menu that will play the files in different ways:

1: just one selectable file
2: a collection of 3 predetermined files (e.g you can choose four different 3-file collections)
3: all files in a row and then looping back to the first until the user decides to stop viewing

Which DVD-authoring software features are essential to do all these options? End action?

Which programs can handle this? I have MyDVD and SpruceUp, do I need another one?

You need to be able to program the DVD. I suggest trying as much
DVD authoring packages (Demos) as possible. Option 2 will be
very hard to implement or not possible at all.

this sounds like a job for Macromedia Flash.