Is the screen resolution set to Full?
If you are referring to the playback resolution in the program and source montitors-yes, both set to full.
One thing I forgot to mention is that the grabs look awesome in photoshop on the same monitors. I know it's apples to oranges, but thought I'd mention it.
A few things - if using a STILL image to tell Premiere how to set up the new Sequence, how does it know what to use for frame rate, and what does it actually use? And what is the destination for the finished video - that will help determine the best project settings. You said it looks bad when rendered - rendered as what? Rendered on the timeline, or exported to another format using Adobe Media Encoder?
More info please then we can try to better assist you. A screen grab of Sequence settings would be a good starting point. Also, if you can share the still image in question, others can test it to find best results/see what the problem might be.
Safe Harbor Computers
First thing I'd ask is how exactly are you viewing the exported video?