The previews are blurry because by default PrE playes videos for preview, in Low Playback quality for low memory consumption.
For a fairly good preview, right click on the monitor, in the menu that appears go to Playback quality, select highest instead of Automatic.
Also render your timeline, if there is a red line above your clips in the timeline. You can render by pressing Enter.
Playback after these steps, and your playback will be pretty good i hope.
Also when you export your clips, they will be exported in good quality. So dont think that if your playback is little blurry, your exported video will also be blurry.
The exported video's quality wil be as good as your source video, if you select proper project preset and proper preset for export.
Is there a red line above your clips on the timeline. If so, you need to render your timeline by pressing Enter/Return. Once the timeline is rendered, the line will turn green and your preview will look more like your final output.
BTW, have you ensured that your project specs match your source footage? This is vital to a successful project, per part 1 of my free 8-part Basic Training tutorial series.
If your video does not match your project specs, you will see a red line above your video when you add it to the timline, even before you add effects or transitions to it. This can lead to major problems later.
Also note that you've got a relatively slow processor on your Mac. You will likely have few problems editing standard def video -- but high-def (and AVCHD in particular) may prove crippling to your system.
Thanks for the tips. My fundamental problem is that I use this program once every couple years and so I know just enough to be dangerous.