By custom setting for DVD I assume you just mean use one of the two custom settings and have that standard for DVD?
One thing I don't like is that each source doesn't retain the setting. In other words what you set up for eq is same for each source you select until going in and changing it. On my previous Eclipse each source had its own saved setting. For example, the eq setting for cd out was different for ipod out.
Use EQ Custom 1. It has a separate curve for each source. Custom 2 applies to all sources. See pg 173 in the Z120 manual. There are some caveats to be aware of. I might be wrong, and I couldn't find a explicitly worded statement in the manual, but it seems you need to customize each source to use Custom 1 effectively. What I mean is, if you select a non-Custom 1 setting in the current source - say "Natural" while in FM, it will be selected for all sources. So even if you set Custom 1 while playing iPod, then switch to FM and manually select "Natural", then go to any other source (including iPod), you will see it is also using "Natural". To say it simply, whatever EQ curve you select applies to all sources. However, if you use "Custom 1" you can customize/change/save that setting independently for the various sources. Hope I said that clearly.
Quick question on adjusting the level output, I know it's there so it must be ok to do but should you have to need to? I mean why don't all the outputs just play at normal. I understand the aux ones would be different if you turned the volume down on the device but shouldn't dvd audio and fm audio be at least close to the same?
You are correct, most people don't need to set different levels for the built-in sources. I only use it for iPod and BT audio.
Disclaimer: I don't play DVD movies while driving. I've got better things to do. So I don't spend much time worring about this issue. On my unit, the CD/DVD level seems to be dependent on the content I'm playing. On a DVD movie (5.1) it seems quieter than other things, like DIVX, an audio CD or MP3s on CD. Not much you can do about that. I suspect it has to do with surround-sound (5.1) decoding into stereo.