Q: Why is the option for choosing a single layer or dual layer DVD greyed out ?

MUST I have a project over a certain length in order to get the dual layer option?

Yes.  A dual layer disk is for projects with total playing time of more than 120 minutes up to 240 minutes.  There is no reason to use a dual layer disk for projects that will fit on a single layer disk so iDVD grey it out until the project is over 120 minutes.

Dual layer dishes are more expensive than single layer disk and using them, if you could, would be a waste of money and resources.

iDVD encoding settings:

http://support.apple.com/kb/HT1502?viewlocale=en_US

Short version:

Best Performance is for videos of up to 60 minutes

Best Quality is for videos of up to 120 minutes

Professional Quality is also for up to 120 minutes but even higher quality (and takes much longer)

That was for single-layer DVDs. Double these numbers for dual-layer DVDs.

Professional Quality: The Professional Quality option uses advanced two-pass technology to encode your video (The first pass determines which parts of the movie can be given greater compresson without quality loss and which parts can’t.  The second pass then encodes those different parts accordingly) , resulting in the best quality of video possible on your burned DVD. You can select this option regardless of your project’s duration (up to 2 hours of video for a single-layer disc and 4 hours for a double-layer disc). Because Professional Quality encoding is time-consuming (requiring about twice as much time to encode a project as the High Quality option, for example) choose it only if you are not concerned about the time taken.

In both cases the maximum length includes titles, transitions and effects etc. Allow about 15 minutes for these.

You can use the amount of video in your project as a rough determination of which method to choose. If your project has an hour or less of video (for a single-layer disc), choose Best Performance. If it has between 1 and 2 hours of video (for a single-layer disc), choose High Quality. If you want the best possible encoding quality for projects that are up to 2 hours (for a single-layer disc), choose Professional Quality. This option takes about twice as long as the High Quality option, so select it only if time is not an issue for you.

Use the Capacity meter in the Project Info window (choose Project > Project Info) to determine how many minutes of video your project contains.

NOTE: With the Best Performance setting, you can turn background encoding off by choosing Advanced > “Encode in Background.” The checkmark is removed to show it’s no longer selected. Turning off background encoding can help performance if your system seems sluggish.

And whilst checking these settings in iDVD Preferences, make sure that the settings for NTSC/PAL and DV/DV Widescreen are also what you want.

http://support.apple.com/kb/HT1502?viewlocale=en_US