1) With the default encoding settings and with the advanced H.264 setting, it doesn't work at all with any of my files. Toast claims there are problems with the source material, but all of them encode to MPEG2 just fine in Toast. Obviously Toast has no problems reading the files. It just can't re-encode them to H.264 for some reason. (All the clips I tested are QuickTime HD files downloaded off Apple's website.)
2) I made my first MPEG2 HD DVD disc on DVD media with the video bitrate set to Toast's maximum of 26 Mbps. It starts to play on both my iMac and my Toshiba HD-A2, but skips on both. It seems to be a problem with the bitrate, in that the iMac's laptop drive and the Toshiba likely can't read the data fast enough off DVD media. If I put the disc into an external Firewire desktop DVD drive, the iMac handles the disc perfectly and playback is smooth. I also tried an 18 Mbps MPEG2 disc, and it still skips on the iMac if I use the internal laptop drive.
What this means for us is that we need to severely limit the bitrate on HD DVDs when using DVD media, for maximum compatibility with some DVD readers. I suspect a reasonable bitrate would be approximately 10-11 Mbps, but unfortunately, this is too low for MPEG2. MPEG2 is too inefficient a codec for good quality hi-definition material at that bitrate. At 10-11 Mbps, H.264 would be greatly preferred, but that is also not an option, since H.264 encoding in Toast does not work properly.
In short, Toast's hi-def disc support is problematic with DVD media at this time. Hopefully these issues will be corrected soon in a software update.
The skipping issue appears to be related to the DVD media type.
My iMac's Pioneer DVR-K06 and my Toshiba HD-A2 do not like Sony +R media (SONYD21). (These were burned as the +R booktype, not -ROM.) At 18 Mbps, both still skip. At 15 Mbps it plays smoothly on the Pioneer, but it still skips on the Toshiba. However, if I use Maxell DVD-R (RITEKF1) it plays perfectly with both machines, even at 26 Mbps.
Unfortunately, MPEG2 uses up too much space, and H.264 encoding still doesn't work properly.
The good news is Roxio is aware of the problem:
We're working on this... but I have authored AVC discs on DVD media.
I'll post an update when we have more information to share, right now we're gathering test files and working on a solution.