I watched the video, but will not have time to respond specifically to that until later. But you seem to be getting on track.
3. I create chapter playlists of the assets i will need from each time line for each menu button
I'm not sure you need the chapter playlists. One of the problems is your titles. It is not a good idea to mix them into the timelines in Encore. Did you try the transition idea I posted in the other thread? Yes, that may be a problem with size on disk as well as the possibility that you could exceed the 1 gig limit for menus etc.
You could put the title on its own timeline and add that to the playlist as needed.
I suspect that you are wanting to have the audio play continuously while you go from one chapter to another. No can do. Create a very small fade out/in at the beginning/end of each audio (in Premiere).