Adobe updates - tells me I'm up to date - on everything. (albeit - I don't see it say 6.0.2 anywhere - on start up etc)
SD interlaced to SD interlaced all the way!
You're playing the m2v from the Encore /sources/xxx folder?
Playing back in encore (after transcoding) - evident but small freezes not so obvious.
m2v playback on "windows media player" - not evident at all. (But isn't that because it's playing progressive scan?)
My thoughts are that the problem is in the transcoding!? It does transcode projects very fast!