This certainly sounds like combing artifacts from an interlaced source. If your source is interlaced, you have to decide if you want to keep it interlaced or if you want to deinterlace it before encoding.
I don't have AVStoDVD installed ATM, but I remember that it offers the possibility to edit the AVS script, so you can add a deinterlacer to the script.
Cheers
manolito
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