Let's see here...
I'm assuming the current pricing of VV has to do with the announcement of Encore some time ago. Indeed, Premiere Pro can burn directly to a DVD without Encore (though menu creation, multiple languages, subtitles, motion menus, animated transitions, etc. require Encore DVD). In short, you can produce "dailies" with Premiere Pro directly to DVD.
As for pricing, the Adobe Video Collection is $799 for Premiere Pro, Encore DVD, Audition, and After Effects. Soo... VV offers about 2/5ths the solution for 1/2 the price.
Encore really only makes sense if you use Photoshop to create menus for your DVD's since you don't need to flatten, merge, render, tweak, adjust, or otherwise contort Photoshop files before bringing them into Encore. (This varies a bit with Photoshop CS since it is about 6 months newer than Encore. We know that multiple-depth nested layers in Photoshop CS confuse Encore, but Photoshop 7's entire rendering engine is built into Encore so it can internally render everything else.)
With regard to 6.5, it was a wonderful version (and still remains a popular solution on the Mac side) but Premiere Pro - frankly - blows 6.5 completely out of the water.
Mutiple, nested timelines - Break longer segments up into smaller chunks. Or, simply use the hierarchical relationship to apply filters and effects to multiple clips as if they were one.
Built-in color correction - Built by the Color Finesse folks incidentally...
As for transformations and other layering/compositing effects, Premiere Pro has adopted the After Effects rendering engine. Hence, you can now simply place a clip in track 1, a clip in track 2, and with the clip in track 2 selected, simply change the scale and position attributes (and keyframes) to what you want. Changing the keyframes over time will produce a moving picture in picture or animated overlay.
A Premiere Pro project saved with effects, transitions, PIP's, etc. all open directly inside of Adobe After Effects. You can season to taste from there.
Premiere Pro also outputs everything you're doing through the firewire port so you can preview what's happening on a monitor in real-time. (No need to render to see results.) This expands on the 6.5 "Real-time Preview" functionality by enabling FASTER machines rather than simply accomodating slower ones.
As for 5.1 AC-3 encoding, sounds like the apps are on-par with each other... BUt it's interesting... Our 5.1 license we offer as an add-on (it's actually a web-based activation) for $199. Which means... If Vegas worked a similar deal, then they're presumably paying for the license themselves and building it into the price of the application which would make their app $199 or so. Not sure they can sustain development for that price but you never know.
F.Y.I.
Daniel Brown
Sr. Evangelist > Adobe Systems Inc.
http://www.adobeevangelists.com