The Pinnacle programs are not very well regarded, and would not be my first choice as an editing program, but I do not have experience with this particular one either, so take that with a grain of salt. If you are satisfied with the editing features, it may be sufficient for your needs. If you want to look at some more professional tools, get the trials for Adobe Premiere and Sony Vegas.
It sounds like PS12 is not really optimal for conversion to dvd-video. You should be able to edit, then output to DV, then use another program for the conversion if you want to test the results from another encoder.
There are several good mpeg2 encoders available, including one free one that is very well respected. It is called HCenc. Unfortunately, it is not the simplest program to use in stand alone form, and you'd need to make an AviSynth script to import the video into it. HC will only encode the video by the way. You'd need to convert the audio into AC3 with something else, perhaps your Pinnacle program has that capability?
There is a program that can utilize HCenc, called AVStoDVD. It almost certainly isn't sophisticated enough in its menu production for a commercial dvd, but you can have it output as elementary streams, then build the menu and author to dvd in Pinnacle (assuming Pinnacle doesn't reencode mpeg2 and AC3 that are already compliant to dvd specs). I have used this program for converting H264, xvid, divx and other formats to dvd-video with excellent results. http://www.videohelp.com/tools/AVStoDVD
When I work with elementary streams, I use a program called DVDLab Pro to author to dvds. It is capable of professional results, but is rather expensive. It will not reencode the video stream though, since it has no built in encoder.
So there are a few semi-random thoughts on your situation. I hope some of them will help in some small way.
Welcome to the forums by the way.