This is strange. Whenever I insert a background media piece - the timeline in Arch looks great. BUT as soon as I add the audio to go with it, it puts some extra black screens at the end of the clip. I am not sure how else to explain it. So what happens is that when I loop the background clip, instead of it being seamless, it runs and then there is a few blank frames and then it loops again. This takes away from the professionalism of the DVD because of this black stutter at the end of the clip.
In Vegas, the clip has NO FADES and works perfectly. When I bring it into ARCH as a MPEG it is fine, but as soon as I add the background media AUDIO, this occurs. I have even tried to shorten the audio, but the same thing happens. Any ideas?

Did you make the audio to be SHORTER than the video? You said you shortened it but did you make it shorter than the video? If the audio is longer than the video, the video will go to black until the audio finishes.

That is the weird part - the audio and the video are the same length - so I shortened the audio to see what would happen - same thing.
What I have ended up doing is changing the MENU length to be shorter in ARCH and that seems to work BUT (a big BUT), now when I burn the DVD and play it, it pauses when it loops.

It SHOULD pause when it loops. That's normal. The pause was probably on your black screen before so it wasn't as noticable.

I guess I will have to make the original video really long so that I won't notice the PAUSE for looping as much - why is this? I am guessing there is no way around it.

Some players will be longer than others. It's a matter of the player needing to go back (i.e. search) to the original point.