Going from VHS to DVD, which codec?

Hi all,
I'm bringing in VHS material through a JVC deck with firewire out. The source video then goes to someone else to be edited, then to DVD through iDVD or VisualHub. I'm recording through QTPro, and I would like to export that recording as the smallest possible file (H.264?) before sending it out (so I can fit it on a smaller external drive or even fileshare it). Since the file will be compressed by VisualHub or iDVD, will giving either of those programs an H.264 file look terrible in the end? Does the file always have to be compressed as mpeg-2 to go to DVD? Are there no mp4 vob methods?
Thanks!

http://dvdstepbystep.com/fasttrackover.php

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