For DVD menus you need some sort fo DVD authoring s/w and that will have it's own menuing system. I do know that Adobe Encore will allow you to draw your menus in Photoshop 7, which is what I do. For static menus anyway
As for the lines and flicker. Recent threads have been discussing these type of problems. If you have a re-writable DVD though, then do try a test burn of a portion of your movie. It might just be a case of trying to watch an interlaced signal on your PC monitor and, if so, will be fine when viewed from s set top box - probably.