What operating system are you using? Which processor do you have and how much RAM? How much free, clean, defragmented space is on your har drive?
What are your project settings (as listed under the Edit menu)?
What model of camcorder is your video coming from and what format and resolution is it?
Have you ensured that your .prel project file is in its own separate folder on your hard drive?
The computer I am using Is Vista Business with a 500gbit hard drive 2gig Ram dual core, video record on a Lumix FZ200 full HD videoing which I have used before with video and photos combined with music overlay a small bit of narration with menu markers with no problems.
And the whole project in a folder
I'm but I'm going to need more specific information in order to help you. What kind of dual core processor are you using and how fast it is? Their benchmark specs vary tremendously!
Although I'd definitely recommend upping your RAM if you plan to do any video editing. I would never try to edit video will less than 4 gigs of RAM.
I would also highly recommend you run Disk Cleanup and Disk Defragmenter and that you resave your project file to a new folder -- ideally a folder on your hard drive with only this project file on it.
Your camera shoots in a variety of formats and resolutions -- none of which are well supported by Premiere Elements 7.
If your going to work in Premiere Elements 7, you're going to need to shoot in AVCHD 1920x1080 60i. You're also going to need to ensure that, when you start your Premiere Elements project, you select the project preset for Full AVCHD 1920x1080 60i Stereo.
Premiere Elements 7 is also pretty primitive with handling AVCHD video, and Adobe has made vast improvements in the way this program edits this format since version 10.
If you are going to work with AVCHD 1920x1080 60i, I'd highly recommend you consider upgrading to at least version 10. And, if you plan to shoot in any of the other formats your camera supports (particularly AVCHD 1920x1080 60p) that you upgrade to version 11 or 12.
That said, you may still be able to work with version 7 if you do a couple of basic things:
1) Ensure that you only shoot your video in AVCHD 1920x1080 60i.
2) Ensure that any project you work on this video in uses the project settigns for AVCHD 1920x1080 60i.
3) Maintain your computer by running Disk Cleanup and Disk Defragmenter.
4) Ensure that your .prel project file is saved in a separate folder on your hard drive, with no other files.