With this type of video, the best solution I've found is to load the video into Windows MovieMaker Live and then output from MovieMaker as an MP4. This MP4 should load right into Premiere Elements 12.
Thanks for your answer, Steve! I was afraid I'd have to do some re-encoding of some type to make it work. I tried what you suggested, and the files that WMM Live outputs, can be imported into APE 12 just fine. Just takes an extra step and more time. It will work for now, although it is somewhat annoying to have to do it this way.
I guess, before I buy my next camera, I should check if its output is compatible with the software. I'm looking to buy a Nikon D7000. So I'll check that out.
Thanks again for your help!
The incompatibility of AVCHD.avi with Premiere Elements has been reported many times in threads here.
The Windows Live Movie Maker does not offer a .mp4 choice. Apparently the Windows Movie Maker does.
The current version of MovieMaker does indeed offer the option to output a Premiere Elements compatible Mp4
Just select Save Movie/For Computer (or, Save Movie/For Hi-Def Display) under the Home tab.
Unfortunately, the AVCHD H.264 footage, inside the AVI wrapper, is atypical, and unique to a few cameras. It is that material, in the non-standard wrapper, that is the problem. Why this scheme was chosen by a few camera mfgs. is a mystery, as it is not standard.
There are several programs, that will re-wrap those AVCHD H.264 AVI files, into an MTS wrapper, but, as you note, they require that extra step.
I would anticipate that if the number of such cameras reaches critical mass, then Adobe will re-write Premiere to look in an AVI wrapper for H.264 material, i.e. that becomes a "standard." However, with many camera mfgrs. scrambling to incorporate the H.265 CODEC, along with Adobe, I am not sure that there will be much "life" to the H.264 AVI's, but might well be wrong.
Good luck, and sorry that the news is not better.
If your camera is insignia, read below...
-Insignia camera uses H.264 to either AVI... SOME to MOV wrapper, so use the MOV wrapper if YOUR Insignia camera offers that option
-Says VLC will convert in reply #6 http://forums.adobe.com/thread/1172956 if you want to try a different program