You can't use video from still cameras directly in Premiere Elements because it uses an MJPEG codec.
The FAQs to the right of this forum explain how to convert the video to editable DV-AVIs.
Conversion to get matching footage is the best course of action. Mixing footage with different specs. and CODEC's will almost always lead to grief.
The first thing that I would do is see exactly what is inside those files. The free utility, G-SPOT, will give you that info.
Then, just find a conversion program that can handle the footage, and get them to match up. Choose a Project Preset to match that, and all should go well.
You have mts and AVI in the same project. Good chance one of them is out of place, in terms of project settings. So why not render (that's the Enter key with the timeline selected) and see if its better?