Please confirm you are talking about setting a loop point at one second and 17 frames?
If so, apparently En can only loop the menu at I-frames, which is why you have a choice of 00;01;17 or 00;02;02. Notice they are 15 frames apart, which is the GOP length.
If you're using transcoded MPEG2 files for the menu background video, I don't know any way to circumvent this behavior. It's possible that using an untranscoded .avi or .mov file would let En force a GOP at the loop point, much like it does for chapter points when the the timeline video is untranscoded.
What is going on with the background video that 2 seconds and 2 frames won't work as a loop point? It's less than half a second beyond where your button animation stops.
-Jeff
The Focal Easy Guide to Adobe Encore DVD 2.0
