I am seeing the same problem with Premiere Elements 11. I burned two discs with the same menu ("Faux Widescreen" was the name, I believe). The first disc was burned as widescreen NTSC and had terribly blurry menus that looked awful. I burned another using the standard 4:3 NTSC and the menus looked much better.
But that doesn't work as a solution, because most people these days have widescreen televisions.