The motion is smooth as it is in Vegas. But in MotionPerfect there are interpolation artefacts visible now and then. Not just small ones, bigger part of the image looks awfully distorted sometimes. I tested MotionPerfect some while ago and after I noticed the distortions I found it completely useless. I'm not the only one who noticed that.
Dynapel's Motionperfect is an external application for changing the speed of clips and also interpolating missing frames (useful for 5 - 15 fps "movie" captures from digital still cameras). It interpolates brand new frames not by blending adjacent frames, as Vegas does, but by using motion estimation algorithms, similar to what is used in MPEG-2 encoding. The resulting motion is super smooth, and can be quite sharp.
However, their motion estimation algorithms are pretty crude, and Dynapel pretty much abandoned the product, as near as I can tell. Too bad, because they were on to something.
On some scenes, the product works amazingly well. On other scenes, it produces completely unsuable output. It really has problems with sharply defined vertical objects. For instance, panning across a white picket fence produces a picket fence that waves back in forth like a flag. Salvador Dali would have loved it, but normally this isn't what you want.
I have been working with some shareware and freeware motion estimation software developed in Russia. I have produced some stunning slow motion with the technique, but it too is not quite ready for prime time (the programmers had problems with their motion estimation as well). I check every few months to see if there is an update. If there is, I will post my technique.
There are several professional level programs that generate intermediate frames with motion estimation etc., and that actually work reliably.
Twixtor is just over $300 in the standard version, it's a plug-in for AE or Combustion and has a great reputation for actually generating good quallity footage.
I wish Sony would push harder to get 3rd party developers to adapt to Vegas.
Is there a person in Sony in charge of ISV (Independent Software Vendors)? Any company -- including Sony -- MUST have broad 3rd party support to win in the software game, and to get this support, they must have at least one person, full time, that does nothing but handle the "care and feeding" of these (typically) small companies. There needs to be published API specs (which do exist); developer conferences (which I don't think have ever been held); 3rd party sponsored marketing, including inserts in Sony mailings, web sites, and sponsored booth space at major trade shows. There has been some of this, but only a handful of vendors.