No, this "feature" is Blu-ray only, files on DVDs or HD-DVDs aren't interleaved.
(I did tell you folks, that Blu-ray sucks, didn't I? )
Well, my $190 HP HD-DVD external drive gathering dust at the back of my PC table agrees with you, and also says you you didn't have to tell me!
By the way, this drive is so much better than the famous XBox drive. I don't know why it didn't get popular at all. Maybe HP just decided to go blu, because I couldn't find the drive right after I bought it.