Video is never simple. Some of what you're observing is actually unrelated to
MainConcept or even video encoding in general.
720x480 video is 3:2 aspect -- wider than normal. The images you're viewing above should be correct.
The "squished" image is actually properly sized; proper aspect; proper ratio; proper geometry.
If you view 720x480 at native storage aspect, instead of proper 4:3 or 16:9 playback aspect, you'll have several problems:
1. You might edit it improperly: Trying to change geometry, not realizing your already viewing it in the wrong geometry.
2. You might get accustomed to seeing the world "wrong" (stretched fat by 10%) and think anything proper is hence wrong.
I readily admit to having done both of these things -- and subsequently having to fix or redo it.
You've likely fallen into #2, and hopefully you didn't alter the video shape to also be victim to the #1 problem.
Did you?
Some of your settings are so aggressive as to do little more than add encoding time, with virtually no quality gains. For example, the "P/Q 31 slowest/best" encoding PQ speed. That's really not necessary. A setting of 16 is fine, 24 would be better, 31 just makes it take forever. This setting is less important than have 2-pass VBR at a good bitrate.
Your video is top-field first. Change to TFF -- don't use bottom/BFF.
I've never seen any real difference among the GOP placement settings, so SCD Fast is fine.
At this bitrate, I'd change the discreet cosine (DC) to 10-bit, not default 9-bit.
You can change the pixel search mode settings, which makes it take longer to encode, but with potentially better (more accurate) encoding. Sub pixel full. Search mode 15. Search range is fine at default (39), but raise it as much as 63 if you want. Noise sensitivity actually has more effect than the other number settings here: set to 3.
The input format should be automatically detected, no reason to specify it here again on that last tab. But you can, if you want to.
Bitrate and the DVD-Video specs themselves will always be the primary limiter on quality possible from shaky home movies.
That's one reason we're working with H.264 so much these days (and therefore Blu-ray and BD-R/BD-RE, as an extension), to compare how well that may work instead. You can always surpass DVD specs, for the MPEG-2 encodes (15Mbps max) and simply not author to DVD. Of course, that somewhat defeats the purpose of "converting" from one watchable format to another, or the ability to easily give out copies to family members.
I don't really see any major mistakes on your part, aside from the field dominance selection. (That would have been a mess view on normal TV.)
Apologies that it took so long to respond. Some of the ongoing projects in Oct-Nov simply turned out more time-consuming than projects. That's how it goes with video work, sometimes. You can quote and estimate all you want, but ultimately the videos themselves (and the equipment, too) determine how fast something happen. You're finding that out, I would imagine, from your own homemade projects. Having fun yet?!
Encode away.
