Yes quality can be effected when manipulating pan and zoom effects found under setting, imaging and then in top half of screen in bow titled "quality"
Also recently it has been made known to VSO that oddly certain pictures taken with the same camera seconds after one another, will have different quality output through PhotoDVD---as odd as this may seem some pictures of trees---seem to turn out not so good when watching the final dvd slideshow.
Are all the pictures bad, just some. This info is of great interesset to VSO Software, maybe you could write to their support team and send in a couple of those trouble pictures so this problem can be worked out.
Do you think this could be an issue of having burned in the wrong format PAL/ NTSC, or did you burn on a CD not DVD?