Any time you reduce an HD video to SD video quality (or worse), you will perceive the image as soft or blurry due to the extreme loss of resolution and detail. That is normal. Not saying there may not be other factors at play, but that is #1 issue.
Make sure Program window in Premiere is set to FULL and not 1/2 or 1/4 which would further diminish apparent quality.
that's a tricky thing.
IMO, you should always in normal situation, start new project with settings that match your source footage.
Then when you export make your adjustments re: size dimensions, frame rate, and so on. You can see ( by clicking between source and export monitor thing) what happens with black bars etc before you export.
If you HAVE to force something into a specific space ( different aspect ratios and dimensions ) THEN it is often best to do what YOU did and scale it down using 'scale' thing, and you see the black bars in your monitor before the export.
When down scaling you should not see bad quality. Upscale usually is horrible ( interpolation stuff ).
good luck !
The issue that you are getting might occur if the frame has been downscaled fairly, like in your case you are going down from 1920 x 1080 to 912 x 320. In these cases, you may expect a quality loss as compared to the original frame (1920 x 1080) as you won't have enough pixels in the 912 x 320 frame to render the same amount of detail which were there in the original high-resolution frame.
Also, a non-uniform scale change (changing the height and width individually) can cause stretching which can further degrade the level of detail displayed while downscaling. Unfortunately, you can't do much to retain the same level of detail as in the high-resolution frame but you can surely minimize the loss of detail by limiting the extent of downscaling being done and avoiding non-uniform scale change ( as it helps in preventing stretching of the frame and helps in scaling proportionally ).
Hope you find it useful, please let us know if you have any questions.
Sumeet Kumar Choubey