Is there a way to set up a watch folder so if I drag mts files into a watch folder I have set up with my encoder that those file's extensions are automatically renamed to .m2ts?
Not using Opus alone.
You could use the Windows task scheduler, or AT command, or something more sophisticated that waited for files to appear and make that run an Opus rename (via dopusrt.exe) of *.mts to *.m2ts but Opus won't do the scheduling/monitoring for you.
okay, I went ahead and assigned an F6 hotkey the following expression and then a text file in the folder named SelectAll_Rename_with_F6.txt (to remind me which hotkey it was in case I forgot).
rename PATTERN="mts" TO="m2ts" FINDREP ext