I don't know if I'd use those files in the first place. I'd be happier working in something lossless or uncompressed.
You should always transcode highly compressed footage before attempting to process it in any compositing app. Some editing apps (NLE's like PPro, FCP, Vegas) have the ability to work natively with some compression schemes, other's need a hardware solution, but compositing apps like AE or the higher end apps like Nuke work much better if you transcode the footage to a lossless, even higher bit codec. I move everything, even XDCam and P2 footage to 10Bit codecs for manipulation and for color correction. It's just a better work flow.
the person that gave me the files said they were h.264 so i'm curous why that is not showing up.
They probably simply haven't been tagged accordingly and/or are in fact H.264, but use a GOP structure, block sizes and matrices that is equal to MPEG 1/2.
1. did i in fact lower the quality of the original file using my conversion technique?
You just repackaged the stream and assuming you did indeed use the right settings, this will not change anything.
2. is there a way to convert it to a better file that it can read and not mess up the pixels or lose correct aspect ratios etc?
Impossible to tell without seeing the file, but I would agree with the others to work with uncompressed/ losslessly compressed files al lthe way.
3 is there any way to just get the original files to work?
No. All support for MPEG formats and derivatives is bound to specific decoders/ encoders and those will only allow to use sources that comply with standardized and verified specifications, which with your files doesn't seem to be the case to begin with.