I think you are right on. My experience indiates that 7 mbps is the upper limit before you start running into DVD compatibility issues.
I recently found out that The National Film Board of Canada uses 2 Pass VBR 5.5 becaue they are most concerned about compatibility with the greatest amount of DVD players. Anywhere in that range should provide an excellent result.
Replicated or duplicated? Replicated means a pressing, duplicated means a burning.
The reason I'm asking is because replicated disks are virtually 100% compatible but are expensive to make in small quantities. A burned double-layer disk is much more problematic. In my experience and based on many reviews I think the consensus is that the only game in town for reliable double-layer playback is to use only Verbatim DVD+R DL blanks. Both the silver (uncoated) and the matte white topped disks work well.
The disks are expensive but seriously are the only bulletproof solution in many discussion groups.
With a really good MPEG2 encoder you could probably get away with putting everything on a single-layer disk. With 1GB of extra material you'd probably be encoding your video at about 4.9Mb/sec which is possible with first-class encoders. I am not familiar with the Adobe products. I personally edit in Vegas, encode with CinemaCraft, and author with DVDLabPro.
The dvd's will be replicated. I am going to have a limited edition of the film pressed. I am leaning towards the dvd-9 so that the quality will be there as well as space for some bonus footage (plus subtitles).
Right now, the film is on a single layer disk---but I have only about 500 mega-bytes left--not enough for a half-hour or so of bonus material.