As soon as I import my .m2t video shot on Sony Z5U, 1080i into Vegas Pro 9.0, the image starts degrading. I set my project to 720x480, and the preview looks like soft focus. As I apply filters for chromakey, it gets worse and worse. When I render to NTSC DV .avi 720x480, it's so poor I am embarrassed to give it to the client. If I put it on DVD via DVD Architect 4.0, it's aweful and is also oversized for a 15 year old TV (presuming least common denominator) that it's cropping the picture on all sides.
Considering I'm using upper end equipment and late versions with mostly default settings, why is the image quality so rotten?