I just re-tried with iMovie (AVCHD clips in iMovie)... output .mov 640x480 Letterbox (720x480) and MyDVD liked it.
Difference: iMovie with Audio track vs Toast with Audio unchecked.
I also did an iMovie with no Audio , which also got the "Unacceptable File Type" in MyDVD.
I got the clue from MacGeek above, when she mentioned the word "audio".
I don't make Nat Sound DVDs, and for the Toast 14 AVCHD video test, I didn't deal with adding a music track. Now I did, and it worked. What a relief.
My little 2.8GHz Mac Mini was sweating under the strain.
I'm looking into upping from 8GB to 16GB of RAM. Upping myself. I didn't want to wait the 2 weeks for Apple to ship (pickup) my Mini with upgraded specs.
I've made about 500 DVDs with FCP and DSP! I so miss both. BUT, my first try with MyDVD last night (video and audio!!) worked so smoothly! It was amazing. Even making chapters!! SO pleased.
I've easily burned 10,000 DVDs with Toast since about 2005 (I actually owned the first Toast CD burner in 1995!). Sometimes Toast acts kind of "Windows"-y, but HOORAY Toast 14 and MyDVD is pretty amazing, coming down off of 10 years with FCP and DSP, then a dalliance with Premiere Pro and DSP, then back to FCPX alternating with iMovie and DSP for the simplistic work I do, MyDVD is going to work fine!
Which gives me breathing room to learn BD maybe.
iMovie took a little longer than Toast 14 to output. I need to look deeper: Is there a box I forgot to find to check, so that the 10 AVCHD clips would have outputted as ONE .mov, instead of 10?