Write this down, its straight from the horse's mouth (Sony) and is taken from Vegas online help:

"...supersampling cannot improve the appearance of existing video."

What it can do is improve internally G E N E R A T E D video frames (tweeners) such as those frames altered when panning, zooming in that motion may be smoother to the degree that Vegas will add "tween" frames. The addition of frames can make transitions appear smoother to the degree the envelope is applied.

Caution: VERY time consuming and should only be used for tiny sections, never the full project since supersampling adds frames, the greater the degee of enhancement the longer the rendering for what is best minimal improvement in many real world cases. Yes, one of its "approved" uses is to smooth out motion blur.