Recently I bought a new camcorder (sony sr11e) which produces SD videos with .mpg extension. When I import the video in Premiere Pro 1.5 in the sequence window the picture looks like the one in the attachment below. The thing that I find even stranger, however, is that in the monitor window which shows the original video the video is displayed fine. When I export the video it also looks as in the attachment.
I tried various project settings, but the only difference was that the sound didn't break. I also tried converting the .mpg to .avi using AVS Video Converter, but when I imported it to premiere I could see only black screen.
How could I fix this problem? If premiere hates .mpg so much, what other editing software (free if possible) would you recommend?
Actually, what is the reason of the bad picture quality??