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You've got a number of problematic issues, John.
For one, your computer is underpowered. A laptop running 2 mhz is barely fast enough to run the program, even editing standard video -- and 20 gig of free hard drive space will not likely be enough to allow for scratch disk files for any intensive video work and the fragmentation and paging that always happens on a C drive.
But you've compounded all of that by trying edit AVCHD video, probably the most challenging, intensive format to edit on any computer. Most people who are successfully editing AVCHD are doing so on state of the art quad-core computers.
So, unfortunately, you're just not going to be able to work with this program, editing that video on this computer. Sorry.
The FAQs at the top of this forum offer our suggestions for minimum computer specs. The computer at the bottom of the list would most likely be required to edit video from that camcorder.
I'm in agreement with Steve, the spec's on your current system are seriously underpowered for the task at hand.
When I started my video adventure, it was on a 1.8ghz laptop, running PE4.
I was able to run PE4, and import (Mpeg2) files, but trying to get any useful work accomplished was extremely challenging. For example trying to render a video of 45 minutes would literally put the laptop to sleep for hours on end (and this was standard definition, not high def).
If I converted short projects of 10 minutes or less to DV-AVI prior to import into PE, I was able to get by, but it wasn't pretty.
I'm now running a Quad, Vista-32, with 4 gig and lots of disk and PE4 runs like a banche.
I now render and burn 90 minutes of SD video to a DVD in a about an hours worth of time (it's a beautiful thing to witness)...
Also, realize that there is a big difference in a "player" being able to play a file, and an editor being able to work with, and also play that same file. It is almost an apples/oranges sort of thing. While testing files in various players is a good thing to do, when one has problems, they do not tell the entire story.
PS you might be able to get a bit more "horsepower" to PE, if you stop all unnecessary programs and processes, when you edit. However, both the CPU and the I/O (your hard drives and controller) will still be a limiting factor.