What you are seeing are compression artifacts due to the very high compression and low bitrate of MPEG1. If you’re trying to make a Video CD, there isn’t much you can do about this. You are stuck with the anemic 1152 kbps bitrate. If you’re making an MPEG1 to distribute to other computers you can try increasing the bitrate if you have the advanced encoder. You can also try another encoder like TMPEnc but I find the Main Concept encoder is just as good. MPEG1 is just poor quality unless your source is pristine and you use an expensive hardware encoder. The only solution for us is to use a higher bitrate or move up to MPEG2, which does better compression and supports higher bitrates.

For the graphic overlay problem you need to match the aspect ration with that of the video. Go into Pan/Crop on the graphic and right click on the image. From the popup context menu select “Match Output Aspect”. That will make the graphic match the videos aspect ratio and should get rid of any of the background showing through.

~jr