A lot can depend on the source of your video files.
What type of camera or camcorder is your video coming from? Are your Premiere Elements project presets matched to that video type?
If you are using MPEGs as your source video, it's a good idea to convert them to DV-AVIs before you bring them into the program. If you are using AVIs, are they from a miniDV camcorder? If they're not -- particularly if they're from a still camera -- you should convert them to DV-AVIs before you bring them into your program.
Ideally, there should not be a red or green line above your clips when you add them to the timeline until you add effects or transitions to them.
Our FAQs, to the right of this forum, offer more information on optimizing your video so that you don't run into the problems you're describing.
Steve's suggestion to do the conversion outside of PrE is the ultimate. One would want DV-AVI Type II w/ 48KHz 16-bit PCM WAV Audio. These will Import and edit fine.
Now, all Adobe NLE's have issues with muxed (Multiplexed - combined Audio & Video) MPEG sources, especially with the Audio. If the Audio in an AVI is odd, problems can arise, as well.
Last, both the terms MPEG/MPG and AVI are but "wrappers." Many different things can be in those wrappers. This ARTICLE will give you some background on formats and CODEC's, plus will give you the tools to "peek" inside those wrappers and see what is really in there. Knowing the internal contents will probably tell us why you have having issues.
Personally, I use a shareware conversion program, DigitalMedia Converter. I can load it up with different format/CODEC files, and then batch convert to DV-AVI Type II w/ the proper Audio Sample Rate and Bit-Depth. I start it, get coffee, or stop by here, and when I get back, all is converted and ready for PrE. Steve's link to the FAQ lists some freeware conversion utilities, and those come highly recommended. As I use only one program, I do not have any experience with the others - but many love and use them constantly.
Thanks guys; I will read further and consider your advice at length. For the moment though, let me add:
Mostly okay with files from my Sony HandyCam AVCHD HDR-CX100 but...
I am getting errors associated with imported avi screen capture clips made with Hypercam 3.0 in the MainConcept AG AVC (Adobe2) DV/H.264 codec Version 184.108.40.206599 (Build 2008-06-11). Its Main Settings include 10 frames per second keyframe every 100 frames AVC Preset: HD 1280x720p Video Format: PAL Baseline Profile Level Auto Picture Type Frame. Initially I had success with that codec and the tool does mention (Adobe2) in its title for that codec.
The sound was captured in uncompressed audio PCM using a Realltek High DEF Microphone. All play fine in WindowsMedia Player. Sometimes sync is lost so that the picture lags the sound by a few seconds. I can sometimes get them into PRE 8 okay but then sometimes not. Persistent attempts eventually work but any disruption by Terminate & Stay Resident (TSR) processes kill the conformed audio and you have to start again. TSR's include Norton's wanting to do a backup, McAfee wanting to install virus signatures, Windows Update showing a notice scheduling a restart, hp wanting to update a driver, etc.
I guess you are in a different timezone to me (could be a good thing) as it is 4:30 am here in Adelaide when it is 10 am in LA or 1 pm in NY or 7pm in Hamburg. Will read your advice ore when I am properly awake :-)
One thing that I see, which could be a real issue: you are using two difference source file types, in what appears to be one Project. Is that correct, or are you doing an AVCHD Project, and then an H.264 for the capture program's footage? PrE does not do well with mixed Assets. Even PrPro does not like mixed Assets, but gets around that by allowing separate Sequences (think mini-Projects within a "master Project"), each with different specs.
Also, is your AVCHD Audio DD 5.1 SS? If so, you will want its Project to reflect that Audio source material - some AVCHD cameras will do DD 5.1 SS, and if not taken into account, will cause some issues.
Good luck, and G'day!