@jshew: That means you don't need to deinterlace the source. You just have to select the correct options in TMPGEnc and it will work fine. With MPEG-1 you just make a mess when not deinterlacing
If the source is progressive, there's no need to deinterlace, of course.
@CheronAph: Sure. You can set it as high as your player allows you to but 2500 is probably enough for all sources. My player doesn't like bitrates higher than ~2600 for video so 2500 or 2300 (depending on the resolution) is the value I use.