Don't worry about the Encore preview quality. It is worrisome, but if you get good results from the burned disk, you get the job done.
The test you want is on the equipment that will be used. If they are using a small HD TV (or larger even more so), you want an upscaling player. Test it on the combination they will use.
Ann's suggestion is to look at whether you are getting the best quality out of your export settings. This is critical. When you have a disk with very little on it, Encore's automatic setting will normally max the quality. But, as noted above, it may not do a good job on down rezzing.