I hope you found my suggestions somewhat useful, kjm.
You don't say which project settings you used when you set up your project, but it's pretty unlikely your output is going to be high enough resolution to play full-screen on your computer monitor. With DV settings, after all, you're only outputting essentially a 640x480 image! Most likely your computer monitor is at least twice that resolution wide and twice that resolution tall.
I don't know what the thick horizontal stripes are you're seeing. Have you rendered your timeline (press Enter) before previewing it on your timeline? Unless you've got green lines along the top of your entire timeline, your playback is going to look pretty bad.
As for your output -- again, it doesn't matter how large the file is you're outputting if your original file was only set up for standard resolution DV. You'll just get a large version of a small file -- which won't look good.
You say you've tried de-interlacing. Does that mean you applied Flicker Removal to each photo?
All that said, you can only go so far working with video resolution. If you're really looking to create slideshows that will look good on your computer, you might better consider a program called Pro Show Gold. Check it out online. It's a dedicated slideshow creator.
Premiere Elements works best a tool for editing video, DVDs and BluRays.
I have applied flicker removal and have rendered the timeline - the green line shows above the timeline. If I don't use the setting DV what setting do you recommend I use?
I just tried HDV 720p and I am getting much better results - the preview window now looks fine and the output, even with pan and zoom also seems ok. I created a F4V file (which does not seem to have a file association, but played fine using VLC). Most of my photos were taken at 16x9 resolution on a Lumix TZ10; a few came from friends at standard 3:2 resolution. Anyway I am getting better results but I still do not understand the whole process - how am I supposed to know what setting to use for these photos.
If one is using ONLY Still Images, then the choice of the Project Preset, and the Scaling of the Still Images in Photoshop, or Photoshop Elements, should be predicated on the output.
If, however, there IS Video, that takes over, and the Project Preset should match THAT, and the Still Images should be Scaled to also match that. The output does not come into play, until time to Share the Timeline.
If that is full-AVCHD, it will be 1920 x 1080 w/ PAR = 1.0. That is what I would Scale the Still Images to. For a little "wiggle room," many use 2000 x 1500 w/ PAR = 1.0, and then let PrE Scale down, or just let the Frame Size effectively crop off a few pixels. I like to Scale exactly to my Video Frame Size in PS, or, if I need to Pan on a Zoomed out Image, just calculate the exact number of pixels needed, and Scale to that.