Welcome to the forum.
IIRC, that Nikon uses the MJPEG CODEC. This ARTICLE will give you a bit more background.
I use the tips in this ARTICLE for setting up my computer for an editing session. For Win7, be sure to see the Win7 Tune Up Tips, on Black Viper's Web site.
Can you also tell us about your I/O sub-system, i.e. your HDD's? This ARTICLE will give you some background. When working in HD (excepot for AVCHD & H.264, which are heavily CPU intensive), the I/O is the most important aspect for ease of editing.
Are you seeing a red line above the clips on your timeline? If so, you're not using the best project settings for this camcorder.
If you are using the ideal project settings, there will be no red lines above the clips on your timeline until you've applied transitions or effects to the clips.
If you are using version 9, there are project settings made for using with DSLR cameras. Your camera shoots in five different video formats, so make sure, when you first start a project, that you select settings that precisely match your video.
It is possible that only one or two of those video formats has a matching Premiere Elements preset, so you may have to experiment a bit. I'd recommend starting with the highest resolution video option first.
Once you've got the ideal project settings for your video (no red lines above clips) your computer should be able to edit it fairly effortlessly, and your output results should be excellent. But it's all a matter of matching your project settings to your source video.
Do you have AT LEAST two hard drives?
You need to have TWO hard drives for video editing... boot drive for OS and all software, data drive for files
Trying to use only ONE Hard Drive for Video Editing
You are a music conductor, with a baton that you use to point to various parts of the orchestra... this is like Windows pointing to various parts of the hard drive to do Windows housekeeping or to load program segments for various functions
Now, at the same time and with the same hand... while still using the baton to conduct the orchestra... pick up a bow and play a fiddle... this would be doing something with your video file at the same time as all the other work
You as a person cannot do both at the same time with the same hand
A computer is a LITTLE better, in that it can switch from one kind of task to another very quickly... but not quickly enough for easy video editing
One hard drive is not as good as two which is not as good as three