Sounds about right to me. As you're doing PIP, that will take rendering time, if you don't have some hardware acceleration. On my 800 MHz PIII, it used to take 10 hours to render 1 hour of video. Your dual should be about 3 times faster. It would be more, but you're typically I/O bound. It takes time to read and write the video files.
5 hours is entirely feasible, which is why I bought a Matrox RT.X100 system, when they came out. PIP is realtime with no rendering required. The MPEG transcoding for DVD is also realtime.