If you’re saying a 8 mbps MPEG2 stream can lose little quality as 2.5 mbps h264, that doesn’t mean that 8 mbps h264 can compress to 2.5 mbps and look the same. The same goes for the idea of 35 mbps h264 going down to 16.

If you just mean extrapolating from 2.5 to 16, the standards of downloaders/homebrew types of things are different from commercial standards. Yes, you’ll definitely see people here release things at bitrates such as 16, as downloaders don’t always want enormous files. But it’s not perfect, and customers would rightly complain if they got a disc with a bitrate like that. That said, legal streaming bitrates can certainly often be lower.