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Since your video format is not supported natively in Premiere Elements, there is no way to put your video in and get the same video out, unchanged. Not even creating your own personal project preset will change that. In fact, it may make it worse.
You haven't said what kind of camcorder you shot your video with, so it's hard to give you exact instructions. But I'd recommend you use for your project setings the Flip Mino standard definition. It may not be perfect, but it's as close as you'll get for that footage.
As for output, it's hard to say without knowing how you're going to use your Shared video. Are you going to put it on a phone or iPad? Display it online? Use it in another project? That willd determine the share process and settings you use.
Matching your project settings as close as possible to your source video is the best way to ensure your video's quality is maintained.
While a good CODEC, H.264 applies pretty heavy compression. If one then uses it again (second generation), there WILL be more compression. There is no way around that.
If one wishes to edit the output files, at a later time, I recommend using either DV-AVI (about 5% compression) for SD material, or one of the Lossless CODEC's, like Lagarith Lossless, or UT Lossless, for either SD, or HD material. This ARTICLE goes into more detail, and also has links to those two, free CODEC's.
Also, PrE can have some issues with Source Files, that use the H.264 CODEC in an AVI wrapper. That is a scheme that has recently been used by a few camera mfgrs., and is non-standard. PrPro CS6.0.1 just added that capability. I would anticipate that it will not be in PrE, until maybe the upcoming version 11, as it is a new, and non-standard scheme.
Steve, Bill, John, thanks for your prompt replies.
Steve, I took your advice and used the Flip Mino and changed the frame size to 720x400. I then used the MP4 - H.264 1440x1080p 30, modified again to 720x400 to produce the output. And the result? I can't tell the original file from the output file, except for the audio, that is a bit lower in volume and actually sligtly more pleasant to listen to.
The camera is an AIM SmartyCam:
The output is to be viewed on my computer and uploaded to YouTube.
Bill, I agree with your fax of a fax concept in theory, but as I said, the image quality degradation is indiscernable, and the output file is not compressed, it is actually more than triple the size of the original!
John, my video is H.264 inside AVI, and it works... :-) GSpot actually says the file is very similar to the one in the thread you linked to. It only differs by having PCM 16kHz mono sound and a different frame size.
Before I used a modified HDV project setting: These and the Flip project settings seem to be mostly the same except that they use different editing modes, so I guess this is the reason why the Flip works so much better?
In any case, thank you all for the help!