MPEG 2 compression problem

Hi, I was wondering if someone could please give me some advice on MPEG encoding in Premiere Pro CS3. I'm using the standard MPEG 2 DVD when exporting my movie (which is made up of PNGs 1024 x 576), the problem is its just compressing my movie way too much.
Even when I shrink down a single PNG image to 720 by 405 they still don't look as bad as when converted to MPEG format. Even when I export it to MOV from Aftereffects its still not as compressed, but i need to keep the MPEG format for a DVD.
My movie is only 1 min 40 sec,roughly 50mb I've got 2 other things to go on the DVD which come to about 800mb all up, so I've still got 3.9gb unused which I'd rather use to maximise the resolution of my movie.
I could increase bit rate but apparently most DVD players can't handle higher than 9, surely there must be some way i can get better picture quality?

I'm using the standard MPEG 2 DVD
That would be an interlaced preset, which can wreck any progressive source.
made up of PNGs 1024 x 576
That is a square pixel aspect ratio proportion for widescreen.  DVD can't handle that.  It'll require 720 x 576 using a 1,4 pixel aspect ratio, so the export is doing come conversion here.  Better if your source was also 720 x 576 with a 1,4 PAR.

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