And yes, the pre-set DVD templates will certainly prepare a fully DVD compliant mpeg-2. That is why they are there, particularly for newbies who may not understand all the niceties of setting your own properties for such a file.
The thing is, though, if you look at the properties in those pre-set templates, you will see, for instance, that they will use a default Field Order. In my case, my VS10+ 'PAL DVD (4:3)' template uses Lower Field First as the default Field Order which is fine if my project is made up of DV clips from my mini-DV video camera. But what happens if I am using video which is Upper Field First -- say from a mini-DVD or hard disk camera? If I use the pre-set template with LFF, I will produce a DVD compliant mpeg-2, yes, but the different field order from the original will mean that it will be essentially unviewable on a stand-alone DVD player because it will be jerky and have jagged edges in fast moving or panning scenes. So at the very least the field order is such cases will need to be changed.
To go on, the default bitrate in that same template is 8000 kbps. This is the best quality setting, and is fine if you have a project or projects which are one hour or less in total. They will fit on a single layer disc, even using the highest quality LPCM audio setting (and 10 or 15 minutes more if you use a compressed audio format like Dolby or mpeg layer 2). But what happens if your project is in fact 90 minutes or 2 hours long? Using a bitrate of 8000 kbps means that you could not fit more than about a maximum of 75 minutes on a single layer disc so VS wouldn't allow you to try to burn it to disc using that setting. So you need to change the bitrate to around 6000 kbps if your project is 90 minutes or 4000 kbps if it is 2 hours long.
So that is why you use the Custom setting, to vary the pre-set defaults -- to take on different properties (including Field Order, bitrate, and even audio format, and a number of other properties), yet still conforming to the DVD standard. To do this, of course, you need to be a bit more experienced and know exactly what is -- or is not -- in the DVD standard.