I don't care what program I have to use..Vegas, Premier, Virtual DUB. It seems every program that has deinterlacing, it significantly reduces the sharpness of the picture. I am figuring this is a drawback of deinterlacing but is there one better than the other? Thanks in advance.
Yes, there is a good one, called "Smart Deinterlacer". Once available only for VirtualDub the tools VD-Plugin and Wax (from debugmode.com) allowed to use this filter inside Vegas. Just a few days ago Mike Crash published a set of Vegas plugins - one of them is based on the VirtualDub Smart Deinterlacer.
Unless they use motion compensation any de-interlacing is going to give some blurring. Even the best hardware boxes can be fooled as well.
I might be wrong but of all the ones that don't use motion vectors Vegas seems to be as good as any.
I made lots of tests in the past and my conclusion was the Vegas internal deinterlacing is a good choice if results are needed fast. Blending blurs a lot here, interpolating generates rather visible jagged edges on diagonal lines which flicker a lot if the camera moves.
Smart Deinterlacer is sharper, jagged edges are less visible if only the filter is well adjusted.
There is no single "recipe" that works for all circumstances, with every type of input video. However, there are several adaptive schemes that use motion estimation algorithms to change the interlacing techniques for different portions of the video depending on movement, contrast, etc.
If you want to instead look at the tools instead of the discussions, then go here: