Encoding 46Mbps MPEG2 stream for Blu Ray?

[Killer3737]

Hi Guys, I've got a video stream which is 46Mbps MPEG2. Here are the full details:

Video
Identifier: 4113 (0x1011)
The ID of the menu: 1 (0x1)
Format: MPEG Video
Format version: Version 2
Format profile: Main @ High
Setting up a matrix format: Default
Duration: 1hr 21min
Bit rate mode: Variable
Bitrate: 45.4 Mbps
Nominal bit rate: 46.1 Mbps
Width: 1920 pixels.
Height: 1080 pixels.
Aspect ratio: 16 / 9
Frame rate: 25.000 fps
Colorimetry: 4:2:0
Scan type: Interlaced
The order of the sweep: Top Field First
Bits / (Pixel * Frame): 0.875

So the bitrate is too high for BR and needs re-encoding but what are my options? Should I just convert it to a lower bitrate MPEG2 under the 40Mbps limit or would an AVC/H.264 encode be a better idea? Which tools would be best for the encode? Also is 1080i25 even legal for BR?

Basically I want to encode this and put it onto a legal single layer Blu Ray with the best quality possible.

[Baldrick]

1920x1080 25fps interlaced is legal(It is 1920x1080 50i, https://www.videohelp.com/hd#tech ).

I would convert to avc/h264. Best tool...hmm...something free based on x264 like avchdcoder.

[Killer3737]

Ok, thanks. A single layer BD-R is approximately 23.2GB correct? If so and my calculations are correct I can shoot for a 38Mbps video bitrate with a single 256kbps 2.0 AC3 track and come out at around 22.5GB all together? I think that's right? Will that leave me enough space for a basic menu? I've never authored a proper Blu Ray before so this is new ground for me.

[Killer3737]

Sorry to double post but it's about the same video so didn't see the point of making a new thread. After looking at it properly since creating the thread it is very high quality as you would expect but for some reason there is a lot of grain to the picture. It's not a film source, it's a feed from a live video broadcast so I'm not sure what caused it.

Here is an uncompress BMP of a scene that really highlights the grain:
http://www.mediafire.com/?54upty666x6f8y7

It doesn't show as bad as that all the time but it is somewhat distracting and a shame to blight this high quality video. So my obvious question is, is it worth trying to tone that done and if so how? If I was encoding it to DVD I'd just add a filter to my avisynth script like DeGrainMedian or something, but what about encoding to H.264? I've not really had time to look into it to be honest, but will I be able to do the same, feed x264 a script with a degrain filter?

My worry though is that I only have an E8400 processor and this will take a long time and be processor intensive? I don't mind a fairly long encode (up to say 24 hours) but I get the feeling a 46Mbps MPEG2 > 38Mbps H.264 with degraining is going to take forever?