I'd go with AC3 as well. Just use the maximum bitrate (ie. 448 kbit/sec) for AC3. Almost every commerical music DVD that is released compresses the audio (either AC3 or DTS). Make sure you use a licensed AC3 encoder and not the free "Besweet" codec.
I use the Mainconcept AC3 codec that comes with Sony Vegas / DVD Architect. Set the "Dialog Normalisation' to "-31 dB" otherwise your audio levels will be too low.
I would avoid using dual layered discs. Firstly, they can be a pain to author and their reliability are still questionable. Plus, if you seed a dual layered disc (DVD9) you're going to have to answer a bunch of questions from all the newbies who don't know how to burn it properly. Somebody will then suggest using DVDShrink to compress your fabulous looking DVD9 onto a single layered DVD5 which will totally defeat the purpose of using a DVD9...
If your show won't fit onto 1 disc (ie. greater than 65 to 70 minutes) then split the show onto two discs.
Here's a cool bitrate calculator:
http://dvd-hq.info/Calculator.htmlAs long as your average video bitrate is around 8000 kbit/sec then compression artifacts will be kept at a minimum. If you use VBR encoding (2 or 3 passes) then it will look even better.
What encoder are you using?
Re: the track listing on the menu. Personally, I would prefer that each track be listed on the menu. Put a number in front of each song, and if you don't know the name of the track then just leave the name blank. That way the user can select the track by navigating to the number.