Hmm, that's strange. Are you using the same frame rates, timecode etc? Are the In/Out points cleared on the movie file?
I don't know if Timecode Reader can read Auxiliary timecode, but you could either set the timeline timecode to match what the movie file should be, then nest that sequence into another sequence and apply Timecode Reader to that. I can't remember whether Timecode Generator allows you to set your own starting numbers; that could work too. However, why don't you go back to the project from which you had created the MPEG-2? That would probably ensure higher accuracy and prevent future problems. An MPEG-2 would also look fairly crap, and have to separate out its audio from the video file.