Correct workflow for HDV to anamorphic SD DVD?

My current workflow amounts to building HD videos in Final Cut Express 4 (FCE), exporting HD MOV files for use in Encore CS3 to create standard DVDs.
To be clear (correct my verbiage if I'm wrong) when I say HD this is what I'm working with:
1920 x 1080
Interlaced
29.97 fps
Originally, before I got an HDTV, I would simply drop the finished HD timeline into an SD timeline in FCE, and create the DVD using these movie files.  On a typical CRT 4:3 television, this actually works okay.  But once I got my HDTV and watched how the 4:3 picture was simply placed in the middle of the screen, I realized I was doing this the wrong way.
Ultimately, I want to create the DVD so the video adjusts to the width of the screen, where the black bars you see aren't actually embedded in the video itself.  Is this called an "anamorphic" DVD?
I've done my best to do this on my own, but any movement in the final videos on the DVDs contain horrible jaggedness, as if you were watching interlaced video on a computer monitor, even if I'm watching it on a CRT 4:3 television.
Here is what I'm doing:
Export 1920x1080 MOV
Import MOV into Encore CS3 project
Transcode Settings:
Format: MPEG2-DVD
Pixel Aspect Ratio: Widescreen 16:9 (1.200)
When I'm in the transcode settings panel, in the output preview window, I can see the jaggedness and can't get rid of it by changing any settings.  If I change the PAR selection to "Standard 4.3 (0.900)" it gets better, but again I don't think this is what I want to do.
Can anyone see the problem in my workflow?  Should I be exporting something different from FCE?
Thanks in advance.

Ann -- Thank you for the response.  After digging a bit deeper into this forum, I found the HDV --> SD DVD Workflow? thread and it gave me this idea as well.
I created a project using "DV - NTSC > Widescreen 48 kHz" as the timeline preset.  I was able to drag the final HD 1920x1080 MOV that I created in Final Cut Express onto that timeline.  Then, I used the Adobe Media Encoder to export MPEG-2 files, which gave me many more options that the same step in Encore.
A while back, Apple removed the ability for Quicktime to export MPEG-2 files, for some reason, and I was never happy with that.  I'm excited to see that Premiere Pro is able to do this, so I might start migrating over to Premiere Pro now.  I just needed the right kick in the butt to get around to it, I guess.
I'd still like to hear any other suggestions, though. Thanks.

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