I didn't make it thru the whole post, but I use Eximius' DVD2One Audio Remaster to do a similar thing. Their program upsamples and interpolates- or rather something like interpolation. They adamantly hold that their process is something else entirely...
No matter what it does, it creates 24/96 files that you can burn to DVD-Rs. The sound quality is fantastic, and about 2 hrs fits on a disc.