I use Premiere 6.0, I've seen this before and I believe it's due to the footage being re-encoded repeatedly from DV AVI to DV AVI, I've noticed it on overlayed tracks as you have,
I think a solution could be to export the movie from Premiere with a lossless codec, then encode to the final source (MPEG2 for DVD etc.)
as I haven't experienced the problem that badly I haven't experimented yet, but I will do now and get back to let you know if that plan solves the problem.
EDIT:
Had a go at trying to solve it, not as easy as I'd hoped. There's some JPEGS in a zip file you can DL and look at:
here
I did a simple bluescreen to overlay two layers (P6_bluescreen.jpg), then overlayed another layer on top with the screen transparency setting, this seemed to create bad blockyness (P6_3layers.jpg),
It helped quite a lot if I rendered the blue-screened layers and then imported this so I was using 2 layers, although there was still bad blockiness in areas of high contrast between the layers (P6_2layers.jpg).
but exporting in lossless formats didn't make any noticeable difference, maybe due to not changing the project settings, more messing about could provide an answer.
I then re-created the 2 layered version from Premiere 6.0 in Premiere Elements 2.0, I used the chroma keying effect rather than the unavailable screen, and I got even worse blockiness, especially in contrasty areas (PE_2layers.jpg).
So it seems like the problem isn't easy to solve, it would be interesting to see if it happens in Premiere Pro to the same extent...