Toast is not off the mark. Source file sizes do not mean very much as the time length of the video is more important. A standard DVd can only hold just hold about 60 minutes of best quality DVD video while DL DVD can cold under 120 minutes. You can of course squeeze more video pn the DVDs but only at a lower bitrate which means lower quality. The program works correctly in this regard and there is nothing to fix. The compress to fit option is basically meaningless since automatically reduces the bitrate to fit the DVD
This is one of the basic editing steps. On the timeline, simply position the cursor at the beginning of the segment you want to remove and click on the "split" icon (just to the right of the Trim icon). Then move the cursor to the end of the segment to be deleted and again click the Split icon. Then simple delete the segment between the splits.
How did you get the video from the camcorder to your hard driv? You say you "captured via Roxio". What does that mean exactly?
Since your video is recorded on the camcorder hard drive, you do not need to "capture via Roxio". You simply use Windows Explorer and copy the video from the camcorder to your storage hard drive.
Running NXT7 on Win8.1
I just tried to replicate your problem following the steps you outlined but I have no distortion in the audio. Everything works just fine.Used a 30 minute mp4m 1280x570 video file.
The created audio proxy file plays without distortion in several players.