Compressor 2.0 and BitVice trial: both are horrible!

I'm having encoding issues with both Compressor 2.0 and a trial version of BitVice.

I have a total of 109 minutes of footage I'm trying to fit on a DVD. When I compress to 6.5-7.6 mbps VBR, 2 pass, via Compressor 2.0 the image is pretty bad/blocky. The same settings but 1 pass actually looks better! These data rates, however, are causing my set top player to stutter ever so slightly. When I drop down to 5-7 mbps, 2 pass the image is blocky in areas of movement.

Are these issues with my settings or with Compressor 2.0's limits? What's an affordable alternative (if that's what's necessary to get a clean image)?

With BitVice, I must be doing something horribly wrong, but I'm not seeing what it is. I downloaded the trial version of BitVice so I understand there will be a watermark on my encode. I just wanted to see how well it does before purchasing the software. The output is outrageously bad! I'm importing an uncompressed 63 minute NTSC video. I set the average bitrate at 5.5, low to 4.5 and high to 7.0. I left everything else at default settings (4:3, 720x480, interlaced input) for an estimated 3.0GB file.

I'm not sure how to insert a screen shot here, but the image is indecipherable.

Does anyone know what's going so horribly wrong with Compressor and/or BitVice?