Many thanks for your prompt reply, very much appreciated.
This method of controlling the sequences settings is useful to know and made trying different options much easier.
I have tried importing some of the exilim footage using the sequence shown in the video but the results are the same, footage still 'jaggy' and 'messy'.
I'll keep trying different options but have tried various custom settings and none seem to solve the issue.
When I check the movie properties it says it is 'a referenceing movie' and I wondered if had some bearing on the issue.
once again many thanks for your help and if you can think of anything else please let me know,
Right-click (or Cmd+click, I believe, on Mac) in the Program Monitor, and check that both Paused Resolution and Playback Resolution are set to Full. When those are set to 1/2 or lower, H.264 playback quality suffers more than you think it should.
Thank you very much - it was as simple as that...
The playback resolution seems to be a big part of what I was seeing - it seems CS3 chooses high quality by default and CS5.5 default is 1/2 quality - great to know!
I suspect I'll find a few more holes in my knowledge in jumping from CS3 to CS5.5 without the intermediate versions so your swift support is very much appreciated.