Nope. This is not a bug. I believe this is intended more for the novice than "experts". If you want more control over the way you render your file, choose the first option in the Make Movie list, the one that points to creating movies to your hard disk. This option will give you more control on how you wanted to render your file for final output.
As PAL is not the most common resolution used when creatings a VCD, it is not in the template menu when you go to create your VideoCD. You can, however, still create them. First, render the video to a file on your hard drive using the Pal VCD template, then go to create a VCD, specify that you wish to use an existing file on your hard drive, and select the MPEG that you rendered. You will get a warning that it is non-standard, but the CD should still burn alright.