Sorry to give you the news you don't want. The problem isn't with Sony Vegas. I've mixed the clip you sent with a divX and a MiniDV avi with disolves and rendered no problem to a number of formats.

You must have a codec problem of some sort. Suggest you re-install any sofgtware that came with the Sony camera on the basis that might overwrite MPEG1 codec with its own?

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Tim