Well, your camera is a MiniDV one (apparently) and if you're in "PAL" land then PAL DV would be a good starting point for your project settings - assuming you did a standard firewire capture into your PC that is. PAL DV is lower field first and that is what the default project settings within Vegas use.

You should be able to determine whether your source footage is "good" by playing back some of problem areas from your original camcorder tapes onto your TV.

It would be useful to know what you've been doing to "spice" up the quality. A few straight cuts and dissolves and rendering back out to DV-AVI again shouldn't give any problems. Rendering out to MPEG2 for DVD creation is a different matter - you may have up bitrate settings to reduce the artifacts you say you're seeing.

But first things first. Determine whether your original footage is ok, set the project settings back to their defaults for PAL DV and render out a "problematic" region of your project to DV-AVI and check the playback of that.