What are the Video Project Properties for your project?

If you put high-def video into a standard def project, you're going to get standard def video out (which is about 1/5 the resolution of high-def).

Also, which Make Movie template did you select? Have you ensured that it's 1920x1080 also?

thank you both for your replies. After pulling some hair out, I figured out what the issue is.

Apparently some rendering templates set "field order" to upper field while I specifically set "Deinterlace Method" in my project setting to none. If you render to Sony AVC / AVCHD, it will preset "Field order" option to "upper field first" and will actually disable that entry so you cannot change it. What I needed is to set it to progressive. So I used internet template for HD, set my bitrate to 20 mbsp, made sure field order set to progressive - after that the video came out sharp and clean!

Same story with mainconcept AVC - default AVCHD template has field order disabled and set to upper field first.

I noticed that only after rendering my clip 20 times to different formats and comparing output visually. This is not really good defaults for a typical users unless I am missing something here.

But my problem is solved and rendered video looks as sharp as the source one. I had to up bitrate as well from default 16 mbps since my source bitrate was 18 mbps.

Search "Match Media Settings" and follow the directions precisely.
Choose a Deinterlace Method if your source is interlaced and you'll be resizing.
Progressive render is not as sharp unless your source is interlaced.
That's all it takes.

hi musicvid10, i did actually start my project with matching media settings - I used the little button in the project properties and pointed to the first video file. Still it did not help - like I mentioned above, even though deinterlacing was set to none in project settings and I picked HD AVCHD template, it set that field order thing to something while it really should be set to none.

That fixed my issue and the rendered video is sharp again.

It is off the subject, but I also noticed that mainconcept AVC with 2 pass captured motion way better than Sony AVC encoder, but many people probably would not notice the difference - both encoders produced sharp mp4s.

You see, AVCHD is a specific format; the default template is interlaced.
It is also not the best delivery / playback format. Stutters and stalls on many home systems, and burdens the Vegas preview.

AVCHD is a transport stream invented for internal hardware acquisition and playback; that means prosumer camcorders and bluray discs. If your goal is home / PC playback, the MP4 templates in vegas, particularly the ones labeled 'internet', are a much better starting place, although you will want to set a higher bitrate.

That all having been said, you should continue editing in Vegas, but do your final mp4 encoding in Handbrake. You're gonna be much happier in the end.

thanks for the explanation! makes sense now but I just wish Sony would document it better or mention that in quick tutorial or somewhere. Not many people will notice this or will have time to figure it out.

yep I used to render to AVCHD/m2ts but definitely noticed stutters and stalls even on my very powerful PC. Never had these issues with mp4 or mkv.

Last question - you said edit in Vegas and then encode in Handbrake. What format would you use then to render out of Vegas? Never done this before..

My aging tutorial uses DNxHD which still works. Others have used MXF/XDCAM as their intermediate.
The newest / best approach is Marco's frameserving script. Search.

The rule for delivery (playback) and even many editing formats is simple:
Program Stream always, Transport Stream never.
Transport streams are dirty.

I stopped rendering to AVC in Vegas years ago. The results are always soft no matter what i try. Now i render to uncompressed, then use Handbrake to convert to AVC. The difference is night'n'day, with the Handbrake output being crystal clear while Vegas' output looks like it's got a diffusion screen over it.