Bump. I need an answer. SPECIFICALLY webcam footage. Gameplay looks fine.
Please share the version of premiere elements, System configuration(operating system, ram etc) , project settings and media info.
I had the same problem. I managed to drastically improve the quality of playback both from rendered and unrendered videos with a few clicks of a button.
Go to the general tab on preferences in premier elements and set the timeline render quality to high quality, slow speed.
After that open up your project and right click your video (the main video playback screen, above your timeline) and set the playback quality to highest.
Let me know if it worked for you
Rendered as in making the timeline play better or the quality of the export.
If latter: post screendump of project settings, media info and export settings.