Just downloaded the trail of Premiere Elements 10. My first experience with it was dragging media from my project into the timeline and the screen re-draws in this amazingly buggy way. I see the same behavior any time I try to drag any item on the timeline. I took a few screen shots to demonstrate what I mean. The timeline becomes completely unusable and obscured while the program re-draws the top of the interface over it. System is a MacBook Air Core i5 running OSX 10.7.3 with an external monitor. I've tried re-starting the app with no change. With behavior like this, it's pretty much unusable.
The red lines above the clips on your timeline is an indication of a mismatch between your video source and the project settings -- which likely also accounts for the buggy re-rendering issue you're having.
What model of camcorder did this video come from and what resolution and format is it?
When you started your Premiere Elements project, which project settings did you select?
Parts 1 and 2 of my free 8 part Basic Training tutorial series shows you how to set up a project and properly get media into it.
I am having the exact same problem, makes the program unusable, I am using the correct settings. This seems to be a program bug of some kind. I've had to go back to PE 9, which doesn't have the problem.