Rana,
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1) Whether the high bit rate Sholay has better PQ than the low bit rate version?
A higher bit rate will definitely improve the pq but only can be noticed on larger display, I mean that is only projector based system can show the deference. I think you remember my reference about Super bit DVD (reviews by HTF) reviewer does not see any improvement on his 55 inch HDTV, where as most of the people from AVSForum can see the improvement.
I think the image looks more solid.
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2) Is the high bit rate version a new MPEG compression out of the previous DVD (i.e. is it a copy)?
3) Is the new encoding from the original master or from a newer and better master?? What good did it do to the PQ??
I can't answer these as I don't have the higher bit version.