The video looks perfect when I hook the camera up to a TV and run it from the internal harddrive. But when I import the video into Premiere and edit it, then export it--it looks grainy and jumpy. It is especially bad when I try to slow down or speed up the video for effect. I'm hoping there is a quick fix in the way that I should import the video. I've heard some people mention that transferring the video to AVI in WMM before taking it to Premiere may help. I am devestated that the video's look so poor. Any help would be greatly appreciated.
Welcome to the forum.
The conversion to DV-AVI is to get the best and easiest to edit material into PrE. It will not improve the original footage.
The original source footage, being MPEG-2, has been compressed already, and is in the format/CODEC to produce a DVD-Video. When you Import that into PrE, and then Export, you will be Transcoding (re-compressing yet again). That is most likely where the quality is falling apart.
Now, PrE works natively with DV-AVI Type II files, and is basically what it is internally converting your MPEG-2 material to. It is also taking the GOP structure and converting it to full I-frame, for frame-specific editing. This ARTICLE will give you some background on GOP.
If all that you were doing was simple cuts and deletion of footage, then another NLE (Non Linear Editor) would be useful, if it offered "smart rendering." However, when one is doing much more, like speed changes, adding Effects or Titles, even in those smart rendering programs, the material will have to be Transcoded.
Now, you might find some improvement, if there is a mis-match in the Field Order of your source footage, and your Export setting. You can run your source files through the great, free utility, G-SPOT, to determine the Field Order. It could be that you can make adjustments there, that will improve things, but maybe not.
Unfortunately, MPEG-2 material is not meant to be edited, but only displayed. That is why it looks good, when the camera is hooked up to your TV.