I'm assuming this video is from a camcorder set up to shoot in AVCHD and that you've imported it into Premiere Elements as M2T files by connecting the camcorder to your computer with a USB cable and using the program's Add Media/From Cameras or Devices to get the media using the Video Importer.
Which version of the program are you using and on what operating system?
What are the Project Settings listed under the program's Edit menu?
Current versions of Premiere Elements should give you excellent results with AVCHD.
(On edit: Steve beat me to the Return key. I was still typing! I do not mean to step on Steve!)
Video viewing and video editing are not the same. It takes a relatively strong computer with lots of memory and fast disk drives for video editing. AVCHD footage is relatively demanding as well.
Relative to Premier Elements, you have to have the project setting correct. Version 11 was an early version relative to AVCHD. If I recall correctly, you had to set up the project manually. Later versions will match the project to the footage in the first clip. And indication of correct project setting will be the yellow "render" bar above the timeline. If it is there, you have the settings wrong. If not, the settings are OK and it may be your computer is too weak for AVCHD editing.
The freeze frames can't be as good as what we expect from digital cameras, or even smart phones. The resolution can be only 1920x1080, or about 2 megapixels in a world where ten times that is about normal. The color and dynamic range are also weak compared to still photos, especially if you are used to shooting RAW. It is due to bitrates generated in video. Last, good video is normally shot at lower shutter speeds to please the eye and brain that expect the "motion blur" of movies shot on film.
For more help, would you do the following:
-Find and post the project settings you are using
-Post a screen shot of your video project in the expert mode
-Describe your computer
-Post one of you "bad" freeze frames