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You just need a more powerful processor... I have a Core 2 Duo at 2.67GHz and a Quad Core at 2.4GHz. The Core 2 Duo is just about powerful enough to edit with smooth playback. Although if I add effects I need to render the timeline to see a smooth playback. With the Quad Core all is fine.
Paul is right. The sintoms you describe show a typical hardware failure.
Video editing require not only a very powerful desktop processor and lots of memory, but many others subsystem, like video card and hard disks fast enough to accomplish the task. AVCHD editing, for instance, requires a lot more hardware optimization than AVI or MPEG for good results.
Thank you both for your help. Editing in AVCHD is all new to me. I'm getting some great quality footage but never expected the editing process to be difficult. Upgrading my system is not really an option at this moment, so here's another question: can I downconvert the raw AVCHD video to another more user-friendly format, without losing too much quality? And if so, what would be the best format/codec to do that in?
Thanks again for your help!
If you are going to view the final product in standard definition then convert it before editing in PE. The software that came with your camcorder probably has a feature to convert to a standard definition format such as MPEG. Or put the AVCHD clip on the timeline in PE and export the clip as widescreen DV-AVI (a better format than MPEG for PE to digest).
If you want to maintain the high definition then convert to HDV MPEG2, you could do this in PE itself, put the AVCHD clip on the timeline and export as HDV MPEG2 or use NERO if you have it. Then edit the HDV MPEG2.