Here is my understanding. I may be wrong.
Files with the type M2TS are mpeg transport streams. They were designed for broadcast applications and they are essentially a wrapper - that is, the file extension doesn't dictate exactly what codec was used to compress the video or audio. Some time after the introduction of the mpeg-2TS wrapper, it started to be also used with video that had been encoded with H264 (Advanced Video Codec). So a M2TS file can contain mpeg2 or AVC video
Bluray adopted the M2TS wrapper and allows the use of either AVC or MPEG-2 video
Studio can encoded bluray images with either codec as shown in the Image Type drop down box. The mpeg-2 option has a lower bit rate and is interlaced, while the AVC option uses MBAFF as the scan type
Sorry that my memory is vague at this point, but ISTR that pixelation issues that began a certain way into a disc image were restricted to using the AVC codec - so the workround was to use mpeg-2
AVCHD discs don't seem to have this choice. The two options are AVC, using a slightly higher bit rate, a long GOP structure and MTBF, or AVCHD, which is interlaced.
Now, I don't recall AVCHD discs being reported as having the pixelation issues, but In would certainly suggest trying the AVCHD setting if you haven't done so already.
I've now made AVCHD disc images of over 40 minutes using both settings but cannot detect any pixelation in either .m2ts files.
BTW, is that a typo or has the time at which the pixelation starts changesd from 32 minutes to 21?