Ruby,
I have exactly the same task! Here's what I've found through doing a few clip tests:
Starting with an Apple ProRes 422 (HQ) 25fps 1080i movie exported from the FCP timeline...
1. Convert in Compressor to HD Uncompressed 10-Bit 1080i60
Results look good but every 5th frame is doubled (presumably to make up for the difference in frame rate change from 25fps to 29.97). Perhaps this is what accounts for your reported jerky movement.
OR
2. Convert in Compressor to HD Uncompressed 10-Bit 1080i60 with Best Rate Conversion
Results look great, no doubling of frames but encode takes 10 x longer on my MacBookPro!!! On close inspection, I think there might be a slight motion-blur artifact, but it's very hard to tell on the short clip I tried. I guess it's going to be most critical when there's a lot of movement in the frame or the image changes rapidly.
To change the Rate Conversion, go to the Frame Control tab in the Inspector. Click the gear icon to unlock all settings. Set Frame Controls to On. Then set the Rate Conversion to "Best, High quality motion compensated".
OR
3. Convert in Compressor to HD Uncompressed 8-Bit 1080i60 with source frames at 29.97
As in the previous test, unlock the Frame Control settings, leave the Rate Conversion on Fast but check the radio button "so source frames play at 29.97 fps". In the Inspector's Encoder tab set Audio to Enabled instead of Pass-through (otherwise it will be out of sync)
The encode time is the same as test 1. Basically the 25fps movie plays at 29.97fps so is slightly speeded up. As whacky as this sounds it used to be pretty standard to telecine 35mm films shot at 24fps frame for frame to video at 25fps, speeding it up in the process. The main drawback is the increase in sound pitch by a note or so coz it's playing faster, but it's possible to repitch it back down in Soundtrack Pro.
Results showed no motion artifacts. I think this version can work depending on the material. I couldn't spot the difference between 8-Bit and 10-Bit, but perhaps it's best to keep it the same as the source (?).
Finally, convert one of the above movies in Compressor to MPEG-2 6.2Mbs 2-pass & Dolby Digital Professional 2.0 and Format in DVD-SP as NTSC DVD
At the moment I'm favouring test 2, despite a potentially long long encode for a 30min movie. It'd be great to know what solution you went with in the end...
Thanks,