At the moment, I'm about 75% done with the digitalFAQ Guides revisions, and will create a new Premiere Elements guide shortly thereafter. That's been the project for the past 4-5 days now.
Looking quickly at these settings, I see a problem, as your source is MPEG-2 for DVD. The DV template has made a bad assumption, and that is where it shows the interlace dominance as being bottom-field. The MPEG-2 files you have are top-field, and the project needs to be set up as such.
I've not had time to get into the Premiere Elements setup, so I can't advise further at this very moment. I'll need some more time this week.
Everything else on that exact screen would have been fine otherwise.
Will add more soon.