Extrapolating the figures used in your example above you seem to be suggesting that a 1400kbit/sec XviD file has the same quality as an 9800kbit/sec MPEG2 file. While XviD compression is much more efficient than MPEG2 I'd be sceptical that the XviD video would match the quality of the MPEG2 video. Though, it would be interesting to compare the differences.

My pet peeve is people who try to cram as much video onto a DVD5 as they can. It totally defeats the purpose of migrating your video from VHS/miniDV onto a DVD if the resulting video is blocky and full of compression artifacts. I've traded for 'upgrades' of concerts on DVD that look significantly worse than my VHS copies. It's a shame really.

I guess it comes down to standards. That's why DVD is so popular. People producing DVDs know that their video will be playable in all DVD players. My hope is that media centres become popular and the DVD/Blue-Ray/HD-DVD simply becomes a place of storage rather than tied to a particular video codec.