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Premiere Elements 1 had a huge issue with MPEG files, version 2 is much more stable and they work much better. You can try downloading and installing the K-Lite Mega Codec Pack, I had good success with it back in the early versions.
Version 1 is great for photos and AVI files imported by Premiere Elements from a MiniDV camcorder, not much else unfortunately.
Thanks for your help, Chuck. I am going to upgrade to v2.
>going to upgrade to v2
How? The current version is 7 (went 1-2-3-4-7)
What is sold now is version 7
OK. So I will upgrade to version 7.0. THanks.