Yeah, I think a better way to go is to lower the min and up the average. There are some shots that really don't need all that extra bandwith to look good and you could use that extra space for more intense ones.

Did you capture the video in 4:3 and cropped it in another program?
Also, how does the dvd standard handle non-interlaced video?
Oh are these laserdisc player video at a film or standard video(29.97) frame rate?

Yes, capture in 4:3 at your highest possible resolution (mine is 720x480), then crop with an AVIsynth script or whatever video editor you are using (VirtualDub/Premiere). The LD video is telecined to 29.97 from the progressive source. An inverse-telecine (IVTC) process can restore the 24fps progressive frames. To get the most out of your dvd, encode your mpeg to 23.97, not 29.97. You'll save a lot of space this way.

Hope that helps.