Testing ... testing ... is this thing on?
FM audio applies a limiter/ compressor, which may have the ill effects you are seeing. It's realyl more menat for speech-only stuff, where you would want it to make the voice sound more voluminous. As for your otehr problems - well, whatever works. I've had no issues with Adobe Media Encoder and rendering directly from AE, but your mileage may vary.
Thank you, Sir. I appreciate the response. For anyone else that may be looking at this for some information, I've figured out a few things myself since I posted.
First, I decided to cut Premier from the flow and just do my simple video edits in After Effects. I rendered the final uncompressed AVI directly from AE, thus cutting out some steps. This has saved time, but there is no noticable difference in quality. Apparently, the extra pass through Premier didn't negatively affect anything.
Secondly, I may have gotten a handle on the audio issue. Since the anomaly sounded like a slight flanging effect, I started looking into the stereo characteristics and found that the original source audio is a mono signal, which AE was converting to stereo, which was again compressed in Windows media encoder. I exported the audio as Mono from AE and this time there was no flange effect after "FM quality" compression.
So there you have it. Sorry to keep this question hanging out there so long only to answer it myself, but hopefully someone will find the thread useful.