I'm using Vegas 5 to render my AVI project using MC MPEG encoder. The resulting MPEG file is saturated (dark) and really bad quality with lots of compression artifacts. I'm using the default settings.
Don't use the default settings - they default to pretty crappy quality.
Use one of the provided templates, e.g. if you are using DVDA use "DVD Architect NTSC video stream" if you are in NTSC-land. Or DVD NTSC video stream if you want an elementary stream.
The "Default Template" should never be used. The results are horrible. Can you imagine how many people think that Vegas is lousy because they try it out, use the Default Template, and then retreat back to Premiere because it produces better looking results?