BBMpeg is a better muxer than TMPG (it creates files that are more compliant and play properly on more peoples' dvd players, and it also allows you to mux from an exact "start" and "end" point of your choosing, which is very convenient for trimming credits when necessary). So you really should try to figure out how to get BBMpeg working on your system if you can. But using TMPG is okay as long as the files it creates play right on your player, and that is your primary concern.
KVCD's created with the x3 template
are non-standard vcd's, so you should mux them as non-standard vcd.
Happy Encoding,
-d&c