These kinds of video camera are really designed to be just point and shoot and upload to YouTube. The video isn't really meant to be edited.
Compounding that is the fact that they often use strange codec (compression methods) that most video editors can't work with. Updating certainly won't solve that problem.
Try using Prism Video Converter on the video. Once it's converted to a DV-AVI, the video should work fine in Premiere Elements.
Actually I was just working with some Kodak Zi6 high def 1280x720 MOV clips in PE7 the other day. Worked with out problems.
Hey Steve, just tried out Prism, a great little utility for converting to DV-AVI.
Thanks so much Steve for answering so quickly. I had already found one of
your earlier posts about the Prism Converter and converted the HD60 video
from the Kodak Zi6 into avi and it worked like a charm. I was able to
import it into Premiere Elements just fine. I usually shoot with a Sony VX
2100 DV Camera but have a cheap Sony DCR HC-52 DV camera to carry in my
saddlebags when I am trailriding on my horse. I am not satisfied with the
quality of the video of HC-52 and think the Kodak Zi6 might be easy to carry
and solve the problem of portability. The video seems quite satisfactory,
much less grainy than the DV from the HC-52 even if the controls, especially
the zoom, are unbelievably limited. I ride into some beautiful back-country
and hope to bring back some video others would have a hard time acquiring.