My compliments on a well documented question. It should be an example to many other who pose their questions here without proper background.
I have no explanation for the reconforming that takes place, because IMO this is a convoluted workflow and I have never tried an approach like that. You also said you don't have access to the original .MTS files, but that may well be the problem. You converted to another uneditable format (WMV) and upon output will need to convert again. That is a number of conversions that you should try to avoid. Every conversion costs quality and can introduce problems like the ones you are experiencing.
Go back to the other machine and convert the raw MTS files to something editable like MS DV AVI type2 and forget about WMV for input. If the other machine is no longer available, convert the WMV to MS DV AVI type2 and accept the further quality hits.
The reason we're having to work in this manner is because the source files are located in Israel while we are in Texas, and the footage had to be compressed for ease of transfer. Why they chose to do it is in this format is beyond me, and they aren't being very forthcoming.
We have asked for some sample footage in raw-MTS format to see if we can replicate the error here. We're also wondering if there might be a problem with the original footage being shot in PAL, instead of NTSC.
One other thing: sadly, Symantec Antivirus is also installed. I personally despise everything Symantec (except Ghost), but company policy is company policy...
I hate Symantec Anti Virus as well, but Symanted Endpoint Protection is great (Corporate Edition).
Can't you download from an FTP server in Israel?