It is a very weird problem, and may be I am missing something since it is my first time working with video editing. I recorded a video in my VCD. So, Using ISO buster I extracted the VCD's dat file as somename.mpg. If I play it on my media player and use full screen it works fine. But after importing it in premiere, the size becomes something like 350 x xxx. The dimension should be 720 x 576 for PAL settings. How can I keep it the same dimension as it should be? :(

Do you mean the preview window? Or after exporting it from premiere it's now at a smaller resolution? If the case is the latter, this can be fixed via the project settings (they usually come up initially upon making a new project.)

Otherwise I say there is no problem, just export it with the settings you want.