Are you using hardware acceleration at all?
Not that I know of.
My system is a MacPro w/ MacOSX 2x2.4 Ghz Quad-Core, 8G RAM, in case that matters.
If you're not using hardware accelerated rendering and playback, then you like have Maximum Render Quality set. This can be turned in the sequence settings, which only affects rendered previews, and in the Export Settings window, which affects export.
In short, Maximum Render Quality forces rendering in 32-bit linear color; that can lead to the effect you're seeing. Unfortunately, MRQ has benefits like better downscaling and deinterlacing that cannot be set independently of the linear color processing--it's all or nothing.
Colin, thanks that's the answer!
Deselecting MRQ eliminates what is a bright outline around shadows.
I just rendered an example to show and was about to post it, then I read your reply and turned off MRQ to see, and the output is correct!
I'm new to all this. Is MRQ hardware acceleration? Too bad to lose something that has benefits. An end-around I've been using is to create content with text dropshadows in After Effects, but that can be annoying when speed is of the essence.
Thanks so much Colin!
Is MRQ hardware acceleration?
Well, you can use hardware acceleration when you have an appropriate GPU/graphics card. Currently, that's a limited number of Nvidia GPUs. One of the benefits of hardware acceleration is that it works in maximum quality during render and export--but it also renders in linear color, giving you the result you saw.
Enabling MRQ is a way to get some of the quality benefits of hardware, but you don't get the realtime playback afforded by the hardware. It also takes much longer to render or export, but the quality boost is typically worth it. This, too, renders in linear color.
Here's a good post to sum up some of this information: CUDA, Mercury Playback Engine, and Adobe Premiere Pro « Premiere Pro work area
Good luck and happy editing!