Just a quick recap....

A DV AVI render out plays and looks fine on your PC?

But both WMV (Web) and MPEG2 (DVD) have these artifacts?

Did you follow Marc's suggestion to up the bitrate and a do a multi-pass encode? - For the web de-interlace.

I have had similar problems before (not yet with Vegas). I ended up dumping out the timeline from the app in question to uncompressed a/v and then re-encoding that.

What are your encoding steps?