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Still images used in most authoring apps, whether used as an alpha overlay (image with "see-through"/transparent areas) or as a still image background (solid image), usually work best as 720x540. These assets are imported separately from the others (audio, video, subtitle text).
For whatever reason, a 4:3 storage (720x540) looks best. Otherwise, a 720x480 (3:2 storage) will be stretched up to 720x540 for working in the authoring app, then exported to DVD at 720x480. This double resizing process (stretch, then squish) is harmful in most cases, clear loss of quality. But a single resize from 720x540 4:3 to the 720x480 3:2 storage appears fine.
If you're wanting to mix video and still, then the other option is to do fully-video menus, as is discussed on the other X-MEN hobby project example in Premiere. Don't mix the image+video assets in the authoring app. The alpha layer (partially transparent) images are used in the video editor at 720x480 instead of 720x540, and are part of the 702x480 video output.
I know this is confusing. Ask questions if you need further explanation. I'm trying to quickly answer a fairly complex question. Making it easier to understand is going to take some thought. You more or less have to just understand video and images work differently, don't try to relate them. This is completely a DVD authoring software issue, present in most GUI-driven authorware.
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