DVD compatible mode - my specialist subject...
There are 2 aspects to DVD compatible mode on the XS32. One relates to something obscure with Nicam (analog) audio, how to handle it if one language is on one channel and a second one on the other. The "Mode 1" and "Mode 2" has to do with which language you get... I'm 99.9% sure this never happens on our broadcasts, so how you set it doesn't matter. Most people set it to Mode 1 "just in case".
The other aspect has to do with the resolution used when the bit rate is between 3.0 and 3.8 inclusive. In this range, if DVD compatible is set to off, it will use a non-standard resolution, which is valid for -VR but not valid for DVD-Video (on DVD-R or -RW).
So basically, unless you somehow find one of these funny Nicam broadcasts, OR you use a rate between 3.0 and 3.8, it doesn't matter how you have it set. But if you record a programme with a rate between 3.0 and 3.8 with "compatible mode" off, you won't be able to do a high speed dub to DVD-R.
I keep mine set to "On, Mode I". That way I know the recordings will always be compatible. The only reason you would want it off is if you were recording to RAM with a rate between 3.0 and 3.8, in this case you'd get a better picture with the mode OFF. This is why there is a note in the manual saying that picture quality may suffer if DVD compatible mode is on with rates of 3.0 to 3.8.
As with all DVD recorders, your recordings will be region free.
Mark