I was trying to have one "archival master" that is HD, that would be the source for whether creating DVD, Blu Ray, or anything else in the future. I can certainly save off multiple archival masters (DVD, MPEG2 HD, AVCHD HD, etc), which is what I guess I will do, and for now just use the DVD master for Encore to create the DVD, which would not require Encode to re-transcode.
It seemed strange to me that Encore wouldn't do a better job downrezing and re-transcoding from an HD master. I understand that the more times you convert files, especially with the lossy codecs, you will get what used to be called the generation loss in the analog world, so that is why it would be best to output from Pinnacle as many master formats as I can.
Thanks again Stan for helping me think this through.