Interframe EZBC/JP2K has been shown to be an effective fine-grain scalable video coding system. However, its Lagrange multiplier values for motion estimation of multiple temporal levels are not specified, and must be specified by the user in the config file in order to run the program. In this paper, we investigate how to select these Lagrange parameters for optimized performance. By designing an iterative mechanism, we make it possible for the encoder to adaptively select Lagrange multipliers based on the feedback of Y-PSNR closed GOP performance. Experimental results regarding both classic test video clips and their concatenations are obtained and discussed. We also present a new analytical model for optimized Lagrange multiplier selection in terms of target Y-PSNR.