Oh wow awsome news! I love watching the Puggo Grande so this has me very excited indeed!
I think a DVD-9 is definitely the way forward. Those mpeg encoders have a hard enough time of it with clean film stock; with all the dust and dirt on these 16mm prints (meaning the image is always moving as far as the encoders are concerned... always in motion is the Puggo - Ha!) I think those encoders need every ounce of disc space possible to keep the bit rate as high as possible.
I'd love to see the Puggo Grande on a DVD-9, though I realise this would take yet more time to do. Uh - us greedy Star Wars fans eh?!
Watching the Puggo Grande is so evocative of how I remember screenings at our local flea-pit, with Star Wars of course being the screening which stands out in my memory the most. That disc bought it all back :)