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What versions of After Effects and Photoshop are you using? With AE 6.5, I can do all of this work without even opening Photoshop. Under the Layer menu there are some handy "Adobe Encore DVD" options, which basically group your layers and rename them for Encore. Then use the Composition > Save Frame As > Photoshop Layers option to create your menu file. Then you can turn off the highlights, render the background, bring both files into Encore and they should combine seamlessly.
If you don't have AE 6.5, it helps to at least have Photoshop CS, which can handle non-square pixels. I suspect your problem is that after saving the file from Photoshop the aspect ratio of the menu and video background don't match. If you don't have Photoshop CS, try changing the size of the menu file to 720x534 (assuming NTSC).
Otherwise maybe it would help if you posted a screenshot showing how the highlights and background aren't matching.
-=Tim
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