I figured out the problem. The DVD player works fine and so does the template. The problem was with the Pixel setting. The AVI file was origanlly 720 X 368 but the template was encoding it 702 X 480. It apparently wasn't the right setting so I lowered it to 702 X 464, and guess what it worked. YAAAY !...
Now I was gonna ask. The higher the Bitrate the better the picture right, If I encode the movie at 1603Bits/s shouldn't it come out right ? but there are those stupid blocks again. I tried lowering the contrast of the movie because someone told me that and I guess I should lower it a little more, but I was wondering if I could make an 800MB Non Standard Mpeg 2 file instead of Mpeg 1 ???