I always use PCM audio on my DVD's. Being that they are music dvd's why sacrafice on audio quality ? I encode with the highest video bit-rate too. I master everything to be 1 hour per dvd. If the whole show is slightly over an hour, up to 10min, I will encode the video down to 7Mbs if needed. With the time it takes to transfer, sync, make menu's and render why bother lowering quality. I'd rather trade snail-mail for quality then download less then the best.
I feel things encoded with low video bit-rates and ac3 audio will only cause people to re-master them in the future. Just like all the VCD's of a few years ago.