Where is this screen shot from? Is it from the movie you output from the program or is it from the Monitor panel in your project? If the latter, have you got your Monitor panel's quality set to highest?
Meantime, have you ensured that your photos are no larger than 2000x1500 pixels in size (72 ppi)?
Is this a photo from a camera, by the way, or from another source?
Dear, the screen shot is a part of what can be seen on the screen of Premier Elements.
Monitor at 1920 x 1080.
The photo is a scanned dia (3,52 x 2,24 cm) at 3600 dpi and colourdept of 16 bit.
The image is way too big.
Scale it down to about 2000 pixels in RGB (not dpi because that does not mean anything in video) before importing it into Elements.
Premiere Elements can't work with 16 bit color. Please set the photo to 8-bit per channel RGB.
Also resizing the photo to 2000x1500 will great improve the program's performance
Changing the colordepth to 8 bits was the solution.
Great news, raf!