I am able to produce hardware compatible DVD now. No jerks or jittering. However it requires full video reencoding of BOTH audio and video. I tested many variants of a/v bitrate and many other settings but only one setting is relevant. Guess what. Interlacing! The video is OK only when I set TFF as interlacing option. (TFF - top filed first I guess) When I set "progressive" jerkiness is back! The very same issue. So the story is back where it began - at interlacing :)
Jan P.S. I haven't test BFF option yet. I cannot test mp2 sound as FFm mp2 audio encoding option has bug and crashes Avidemux. FFm ac3 is fine.
