No, saving chapters and menus isn't going to happen when converting this to dvd-video.
You can use MultiAVCHD to import the m2ts file and output as a finished dvd-video. It uses the HC encoder and will do a good job of this. But you lose menu structure. If I wanted an elaborate menu and specific chapter points, I'd import the output from MultiAVCHD into DVDLab Pro. (LabPro is a fairly expensive dvd authoring tool...there are some free alternatives)
In the past, I've also used an AviSynth script to import the m2ts file, resize it, and convert to mpeg video stream using HCgui. I used ClownBD to extract the audio and convert to a dvd-video compliant stream. Then you can import the two streams into a dvd authoring program and build menus.