Premiere Elements 7 really isn't set up to handle MP4 video. In fact, Premiere Elements didn't really get good editing MP4 video until version 11.
High-def support in Premiere Elements 7 was pretty much limited to video from tape-based HDV camcorders.
Disappointing, but thank you for the help!
Please consider my different perspective on the question that you ask related to a program I still include on my Windows computer and use from time to time.
1. Premiere Elements 7 HD Support is not limited to video from tape-based HDV camcorders. It offers AVCHD project presets and allows you to export
even MPEG2 1920 x 1080p30 or p59.94 or 60 by customizing the HD720p preset under Share/Personal Computer/MPEG. There are many export choices. There is also opportunity for H.264.mp4 exports that I can point you to under Share/Mobile Phones and Players.
2. In Share/Disc/ you have opportunities to burn to disc DVD (for DVD-VIDEO standard or widescreen on DVD disc) or Blu-ray disc format on Blu-ray disc.
I suspect that your issue (resolution of the import within the project) is in the project settings. Premiere Elements 7 uses as the default project preset NTSC DV Standard (720 x 480 4:3 @ 29.97 interlaced frames per second). The project preset is supposed to match the properties of your source .mp4. If you are just Ok'ing the New Project dialog preset at the beginning of your new project, this could very well be the first matter that needs attention.
a. What are the properties of this .mp4...video compression, frame size, frame rate, pixel aspect ratio, etc.
b. What has been set for the project preset - NTSC DV Standard or something else in the new project dialog?
A concern about Premiere Elements 7 goes to the fact that it is a 32 bit application whether it is installed on a 32 or 64 bit computer operating system. This has computer resources implications for getting a larger project done successfully. But, I do not see you bringing a computer resource issue at this point...sounds to me more like a project settings matter.
Perhaps your subsequent details will reveal another cause of your issues. But, the one that I suggest is worthwhile ruling in or out of the problem equation.
Please review and consider, and supply more details.
Do you have the latest version of QuickTime installed on your computer along with Premiere Elements 7? Does your video audio file contain 5.1 channel audio?