First, go to Edit/Preferences and turn off the Background Rendering feature. This troublesome feature was later removed from the program. (In fact, go to the Help menu and select Check for Updates. The 8.01 update should automatically turn off this feature.)
Second, I highly recommend against using WMV files as source editing files in Premiere Elements. Sometimes they work -- but more often than not, they cause problems and often crash the program.
You don't say where these WMVs came from or even if they are standard definition or high-definition video, but the smartest solution is to use a program like Windows MovieMaker to either edit the files or to convert them to a more standard editing format, like DV-AVIs or hi-def M2Ts, per the FAQs to the right of this forum.
Thanks for the reply, Steve. Just downloaded the updates and got rid of the background render. The file I am trying to use in my project is a high def. torrent that I downloaded (legally) and is pretty lengthy at about 2 and a half hours in length. It says that the torrent's format is "Video Clip (.avi)". I opened the video in Windows Live Movie Maker and saved it using the option "Recommended for This Project" which saved it as a Windows Media File. There are no options for DV-AVI or hi-def M2T, unless I am missing something. I tried downloading the converters mentioned in the FAQ and the three free ones failed to convert or refused to recognize the original file. I tried to use Premiere itself to do the converting, but the export button is not "clickable" in the project. Hope that helps to clear some things up.
I'm sorry. I can't be of much help working with torrent files and their non-standard codecs.
You can try opening the AVI you downloaded in G-Spot and seeing if it reveals the codec, frame rate and frame size.
If it's any kind of standardized codec, we may be able to convert it to an editable format using one of the programs in the link I posted above.
Unfortunately, Windows MovieMaker is just going to output as a file that doesn't get us any closer to a solution.
Just ran it through Gspot. It says "Codec: DX50" and "Name: DivX5.x/6.x". Also, the MPEG4 icon is illuminated. I don't know if that will help or not
Xvid/Divx are output files, not meant to be edited (variations of the MPEG4 codec, often used for Internet streaming video) so, they mostly do NOT edit well (if at all) in any flavor of Premiere
To edit a divx file, start at http://www.divx.com/
To edit an xvid file, start at http://www.xvid.com/
To edit WMV http://www.microsoft.com/windowsxp/using/moviemaker/getstarted/default.mspx
You may be able to convert the file to an editable file using Super.
But I'll need to know the frame rate and size, as I said above, in order to tell you which specs to use in the program.
When I have to edit DivX (or the open source Xvid) files, I use DeskShare's Digital Media Converter 2.7 (older version now), and can batch convert to DV-AVI Type II (I am doing SD Projects). Those Import and edit fine. However, and as John T. points out, DivX is a very heavily compressed delivery format and there is a major quality hit with that compression. There is not way around that, so be prepared for even a converted file to not look so good.