Can I get a decent quality DVD out of iMovie?

First I tried "sharing" from iMovie to Media Browser using the large format, 720 x 540. Where does this format fit into the scheme of things? Seems a bit wierd since it's not DV or SD.

720 x 540 is the 4:3 aspect eqivalent of the 960 x 540 16:9 aspect ratio which are both quarter frame/half dimension equivalents of your 1080i/p 4:3 HD display (1440 x 1080) and 1080i/p 16:9 (1920 x 1080) HD display. Seems like a very lagical choice for three reasons:

1) Your AIC footage is stored in a 1440 x 1080 matrix
2) The 960 x 540 size is the max display limit for 30 (29.97) fps (which you don't have to worry about with PAL but allows both NTSC and PAL users to operate in the same application environment)
2) And owing to the fact that your DVD will be encoded to the MPEG-2 format which is limited to a 720 width ML data matrix (for both PAL and NTSC) for playback by commercial DVD players to SD, ED, HD displays.

Anyway, when this is used in an iDVD project the resulting movie is nothing like the original - lacking in colour and definitely not very smooth at all. Motion is quite jerky, in fact... Thinking it might have something to do with having to transcribe 720 x 540 to something the DVD can understand, I tried exporting from iMovie using the Quicktime option and selecting PAL DV. But when this is used in iDVD the resulting DVD is just as bad.

In what mode was your original footage taken? Such problems as you describe often accompany the conversion of NTSC footage to PAL. Since you did not mention this specific nor include a country of residence in your profile, thouhgt it might be a good place to start.

My original footage is plain simple PAL DV.

This is what I wanted to know. Converting an NTSC movie to PAL means changing the frame rate from 30 (29.97) fps to 25. If they haven't changed things, Apple uses a simply dropping one out of every 6 frames which can cause the resulting file to be "jerky" as you describe -- especially when multiple vectors of motion are involved. However, since this is not the case here, this particular cause can likely be eliminated.

Since I posted I've done some more forum searches and iMovie 08's handling of DV in general seems to be very suspect as soon as you try to export it in any way

Most of these discussions seem to refer to the loss in visual quality (usually complaints regarding sharpness, interlace/field issues, etc), so they don't seem to be directly related to your stated issue.

Looks like I might be cranking up the copy of Final Cut Express that I bought!

Believe that goes without saying if quality and accuracy are your primary concern. For me, iMovie '08 is currently more of a curiosity that may point the way to a "poor man's Porsche" approach of non-destructive editing by "proxy" rather than a "ready for prime time" application. Love the upload presets but deplore the apparent absence of a manual "back door" to the gallery and the YouTube playback problem.