I've given up on Pinnacle Studio, and have been playing around with Vegas 8 demo. I just can't get a quality video out of Pinnacle. Its always blurred. Vegas 8 does a MUCH better job at rendering, and I've had one GLORIOUS result. However, with a problem, but (now fixed).
There's an option to check when you go to make the video. This box says "stretch video to output frame, don't letterbox". I didn't have that checked. I have an overlay that masks the video in one spot. The overlay wasn't covering the full frame in the output video, but it did in the editor (which is letterboxed). It took me a long time to find the fix -- check this box. Changing the dimension of the overlay did me no good at all.
Now, I'm a bit confused. It seems to me that letterboxing would cause the black borders at the top and bottom of a video. But, ff my source is the same res as the output (both 4:3 aspect and same res too), why is the final video letterboxed? I notice just a tiny bit of distortion (and not really a problem), but why does this behave this way? My input is 640x480 AVI. I'm rendeing to WMV at 640x480. So why am I getting this letterboxing?