Well, Premiere Elements edits video rather than film. But that said, to create a high-def video, select one of the high-def project settings. It doesn't matter which. Full AVCHD is fine.
As for your photos -- it depends on whether or not you need them to fill your video frame. High-def video is 16:9. So, if you want your photos to fill the frame, they will need to be cropped to 16:9 (1920x1080).
Welcome to the forum.
Along with Steve's excellent suggestions, the exact format of the Still Images does not have to be the same.
However, if you are doing any processing to the Images, say in Photoshop, or Photoshop Elements, then I find it easiest to just use the native Photoshop format, PSD, as those Import and edit perfectly in Premiere Elements.
If your stills camera shoots Camera RAW, you can even probably Import those files into PrE, so long as you have latest ACR (Adobe Camera RAW) module installed. In PrE 11, the very latest version of ACR will install, and handle the Camera RAW files from the latest cameras.
However, many, who shoot Camera RAW (whether Canon, Nikon, or others), like to process their Camera RAW files through the ACR module in Lightroom, or Photoshop (either CS 6, or PS Elements) first, and then I recommend the PSD format.
If one shoots JPEG in their stills camera, but do not need to process those Images in any way, then the JPEG format is fine. If those JPEG's do need to be processed, then I would again Save_As PSD, rather than doing another round of JPEG processing.
If the Images came to you as PNG, GIF, TIFF, and some other formats, then they should Import and edit just fine.
As you can see, the answer is that many Still Image formats work fine, but if those Images get processed, or manipulated in any way, then I feel that the PSD format is as good as it gets, and will work perfectly.
A few considerations for using Still Images in a Video Project are:
- Video will need RGB Color Mode (no CMYK, or LAB Color Mode)
- Video will need to be 8-bit Color Depth, so if one shoots 16-bit, or 20-bit (with some Camera RAW Images), those need to be converted to 8-bit, and Photoshop is great for that.