yup that's definitely a problem!
the artifacts are definitely caused by bad h.264 being made in the h.264 exporter - not by the internal guts of premiere or ame.
I recommend that you make sure your installl is up to date.
if that doesn't work and you're after a better quality 3rd party encoder that does work look at x264pro.com
Thank you so much for your reply. Updating everything now, seeing if that fixes things. Much appreciated.