Strange considering vob files are actually essentially mpeg .
To answer your question directly, Yes it is possible ( and I do it all the time) but that doesnt mean Encore will still like it . Give it a go ,you have nothing to lose .Im not a great Encore fan: Im far too simple( )
DVDWS certainly doesnt mind vob, or mpg2 .. whatever you choose to call it. There are vob to mpeg converters free, expensive but available if encore says no. Most NLEs ( im not sure of Premiere Elements!) and certainly Uleads budget Movie Factory 3 & 4 happily take vobs as starting material. If your needs are simple. try DVD Shrink in its reauthoring mode.
PS Try this It wont replace encore but is handy for simple projects and is dead cheap ( Ok ...affordable )
http://www.ulead.co.uk/dmf/dmf_stand/features.htm