Install DGAVCDec and Avisynth. Open your M2ts and save as Your Project.dga.
Avisynth script. Paste this into notepad and save as: Whatever.avs
LoadPlugin("Your Directory Structure\DGAVCDecode.dll")
AVCSource("Your Directory Structure\Your Project.dga")
Spline36Resize(704,480)
Open this in HC Enc. Set your bitrates and check 16:9. Add 3:2 pulldown and encode.
For freeware and animated menus your best bet is DVD Lab Pro, which has a fully functional 30 day trial. Make certain all your work is finished and you have your animated menu movie and everything ready before you install the trial, so you can finish your DVD authoring in the 30 days.