As PRE8 can read your file, your best bet is to load the file into PRE but don't do any editing. Rather Share> Personal Computer> DV-AVI. This will produce a file that is in the best format for PRE8. Load it into a new project and away you go.
Insanity is hereditary, you get it from your children
As Neale says, the problem is not the program -- it's the type of video you're editing.
Neale's solution will work -- if you're editing AVCHD.
But if you're using video from a still camera or a pocket camera (like the Flip or Webbie) you're better off converting the video to DV-AVIs before you bring them into a Premiere Elements project, per the FAQs to the right of this forum.