To make sure that I am following correctly, you are Importing 1920 x 1080 videos with square pixels, PAR - 1.0, into a 640 x 360 Project, with an unstated PAR. Is that correct?
The editing frame size and the export frame size are set to 640x360 which I believe is close to the youtube default size.
How are you handling the down-rezzing from HD to less than SD?
Where did the Frame Size of 640 x 360 come from?
Maybe I am just confused, and something else is happening?
I can't answer yes or not confidently, so I'll walk through what I'm seeing.
Project Settings > General, indicate Video Frame Size 1920x1080, square pixels 1.0.
When I edit in the timeline and drag and drop new clips, I have them all set to default scale to frame size. Additionally, anything I create in photoshop I save on a 640x360 canvass so I'm using the same baseline size for everything, that way I know where it will all end up when I bring it into elements.
When I share, I'm then choosing the following settings:
Windows Media > Email and Playback on a PC
Video frame: 640x360
Pixel aspect ratio NTSC Widescreen 16:9 (1.2121).
The rest shouldn't affect it. Now that I'm typing that out I see a discrepency. The source pixel ratio is square, while the output I'm trying to make is widescreen. That may have some negative effects. I'm going to change the output to a square pixel and re-produce (which will take upwards of an hour) and try that.
Aside from the pixels, does my info above answer your other questions? Do you see any other issues with what I'm doing?
That turned out to be the issue. The conflict between source pixel size being square and output pixel size trying to be forced into widescreen. Everything lines up great now.
Much appreciated for your questions, they lead me to re-examine my steps which ultimately lead to the solution.
With that 1920 x 1080 Project, I would expect that your source footage for Video is 1920 x 1080. Is it? If so, you should not need to Scale to Default Frame Size.
For the stills, I would Scale them in PS/PSE to 1920 x 1080 w/ PAR = 1.0 (square pixels), so no Scaling would be necessary there either. The quality will be much better, than letting PrE Scale up, as the algorithms in PS/PSE are much better.
As for the issue with the Export PAR, that is likely a contributing factor.