Mike,
I recommend you play around with both – which gives you better results? With mpeg, make sure to check the settings. Your camcorder is a beauty (I know, I have two) and shoots amazing video.
I can’t answer on the DVD question. I can say that the videos I burn to Blu-Ray look fantastic. I had to replace my old blu-ray burner recently, I upgraded my desktop to Windows 7. My new burner cost $130.00.
Good luck!
http://www.youtube.com/user/DesignCBTs?feature=mhee
