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Ulead Video Studio is actually more compatible to those type of video files, Shannon.
But, if you do decide to stay with Premiere Elements, make sure:
1) You don't capture the video with one video editor and then do your editing with another. Because of file conversions that may take place, you're better off doing as it says in the instruction sheet that came with Premiere Elements. Finalize the DVD, put it in your computer's DVD drive and then use Get Media/from DVD to rip the file into the program.
2) Ensure that the Premiere Elements project you're trying to work in is using the Hard Drive, Flash Drive Camcorder setting.
I have the Sony DCR-DVD305 and use the supplied Sony software to download MPG's to my PC in a similiar fashion (Picture Package v1.8.1).
I'm suspecting that if you are NOT seeing the "Conforming Audio" option that there maybe a problem with these MPG files (versus an issue with PE). It could be that the suspect MPG's got corrupted during the download (or Murphy's Law is lurking).
Some quick things to try and isolate:
Take suspect MPG and load into Windows Movie Maker (WMM).
If sound doesn't play in WMM, it's more likely a file issue, and not PE. If the sound is okay, just convert within WMM to the DV-AVI format and load that into PE.
Or, just load the Handycam MiniDVD into your DVD Player (or PC) and see if the suspect files play sound okay with the resident .VOB format of the DVD disc (don't forget to finalize the Mini-Disk). If this works okay, there are ways to load the .VOB files into PE for successfull editing.
Post your results...