I would not recommend using MJPEG files (video from still cameras) in Premiere Elements. Even if the issue you're seeing now seems to be minor, you're likely find that, as you work, you'll find more and more problems. So I'd recommend revising your workflow now rather than put dozens of hours into your project and then find yourself needing to start completely over.
If you're using the traditional version of Windows MovieMaker (not MovieMaker Live) you can use it to convert MJPEG-AVIs to DV-AVIs. Otherwise MPEG Streamclip (a free download) will work. Instructions for using these tools can be found in the FAQs to the right of this forum.
Welcome to the forum.
I do not recall seeing any issue with muxed MJPEG files, regarding truncated Audio. First, take a look at this ARTICLE on MJPEG files.
Next, all Audio files (muxed or elemental streams) must be Conformed, which converts them to 32 bit, floating point files for editing. If one does not allow the Conforming to complete 100%, the Audio can be truncated. See this ARTICLE.
Thanks for the replies. Ok I downloaded Motion JPEG Codec 3.2.4 from http://www.free-codecs.com/Motion_JPEG_Codec_download.htm and the clips come in fine. I would rather not convert the files if I don't have to. Is their any disadvantage to using this codec?
I am not familiar with that CODEC. I have both the Morgan and the MainConcept MJPEG CODEC's, and have never had any issues. They are not free (or at least were not, when I downloaded/installed them), but that does not mean that the free one, that you installed will cause any problems. If it does, then just uninstall it, and get either Morgan, or MainConcept. I have only read of one user have any problem with Morgan, and MainConcept's has been 100% so far. [Between you and me, I think that the one problem with Morgan was OE on the part of that poster, but I could never be sure - whatever, MainConcept worked perfectly for them.]
Good luck, and remember, be sure to let Conforming complete 100%.