Compressor to Encore, Why is it Transcoding?

So I found this video on YouTube:
http://www.youtube.com/watch?v=CbPty1t2I-g&list=FLVM5L7VYQR2lOqf3xxaQpkg&index=4&feature=p lpp_video
I follow the directions exactly, import the assett into Encore and it still wants to Transcode.
I wasted my entire weekend encoding and working on this project and now it is all a waste of time.
Anyone have a clue on how I can fix this?

Trying to open a project, but it seems to be frozen... Ugh.. Any time I savea project in Encore, I can not reopen it.  Wonderful software!
Here is from Media Inspector
* * * Media Inspector 0.7.443 file analysis report.
* * * Media Inspector is ©2011 by Diego Massanti - http://mediainfo.massanti.com
* * * MediaInfoLib by Jerome Martinez - http://mediainfo.sourceforge.net
Created on: Mar 19, 2012 12:34:04 PM EDT
Report for file: 20120315_124858.FINAL-2.m2v
General / Container Stream #1
    Total Video Streams for this File.................1
    Video Codecs Used.................................MPEG-2 Video
    File Format.......................................MPEG Video
    Play Time.........................................1h 27mn
    Total File Size...................................14.3 GiB
    Total Stream BitRate..............................23.4 Mbps
Video Stream #1
    Codec (Human Name)................................MPEG Video
    Codec Profile.....................................Main@High
    Frame Width.......................................1 920 pixels
    Frame Height......................................1 080 pixels
    Frame Rate........................................29.970 fps
    Total Frames......................................156870
    Display Aspect Ratio..............................16:9
    Video Standard....................................Component
    Scan Type.........................................Progressive
    Color Space.......................................YUV
    QF (like Gordian Knot)............................0.361
    Codec Settings (Matrix)...........................Default
    Video Stream Length...............................1h 27mn 14s 234ms
    Video Stream BitRate..............................22.5 Mbps
    Video Stream BitRate (Nominal)....................28.3 Mbps
    Video Stream BitRate Mode.........................VBR
    Bit Depth.........................................8 bits
    Video Stream Size.................................13.7 GiB (96%)

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