The reason is the latest Windows 10 update.
Because Pro17 is not updated anymore it will stay a problem to use MTS files with surround audio.
Possible solutions
1. Use only MTS files with stereo sound.
2. If you have Vegas Pro 16>>no problem to use it.
3. Upgrade to VPro 18 where a solution will come in the next update (said MagixDerek)

I was able to restore .MTS functionality in Vegas 17 and 18 by uninstalling Security Update for Microsoft Windows (KB5001330).

I've paused updates for a while.

Thanks for the replies. So, won't be able to use Vegas Pro 17 to import mts unless they are converted to stereo or even play any previous projects and the only solution is to go back to an older version of Windows or upgrade to 18 but currently that still doesn't work? That's not good news!

J_d, thank you that was a good solution, you are a God! Having removed KB5001330 I can now open my Vegas projects without it instantly crashing, which of course is good news. For the moment, a temporary solution but think the update might effect other formats and quite a few users will be wondering what just happened. I appreciate that the problem is the naughty people at Microsoft but is there any chance Vegas could address the problem, would be nice because it's just ruined my week?

@Pfl-uk please see this thread and the VEGAS team member's comment there.

i uninstalled that update, but no luck

Poor result. I really hope Magix can patch this.

Try removing Microsoft Security patch KB5001330 and KB5000842. This work for me

What for all who are not able to uninstall these KB`s? My work is frozen ! What else can I do?

@mku

Have you read the thread, and specifically @jn-'s post?
https://www.vegascreativesoftware.info/us/forum/windows-update-problem--128722/#ca800703

@mku

Have you read the thread, and specifically @jn-'s post?
https://www.vegascreativesoftware.info/us/forum/windows-update-problem--128722/#ca800703

Thanks a lot to help me. I did not know this thread. By the way I went the article through and was able to remove the two critical KB's as described (many thanks to all those who have created this description so perfectly) - Vegas still not be able to start a project with mts content. So I have to wait for a MS or VEGAS solution. 😭

@mku
There are already so many threads on this topic - it's easy to lose track.
I read in another thread that it might also help to update the Intel and Nvidia/AMD graphics card drivers.
From Vegas Pro - Help / Search for driver updates 

Been using mts files with Vegas Pro 17 for the past year and suddenly they now crash the software and I cannot load any of my past projects. Running the last build of 17 and a recent version of Win 10. Emptied the Vegas cache and reinstalled it but still crashes. Tried links to previous versions but they are not active. Real pain and would appreciate a solution. Thanks.

Solved, yeah! Install the Win10 update from 11th May 21, then install the V17 update to Build 455. Many thanks to all who helped in these special task.