(will check, the problem may lie elsewhere.)
Try again....issue is resolved, but might be useful for others so here it is.
The still blockiness is because "Preview" is in a low-res setting - When ( Editing a Video) that's the only way to get it playing smoothly.
Despite the image being static, it seems Vegas Studio doesn't want to give you the "best" preview, rather whatever is set - a warning would resolve this...."upscale video-rate" since the image is a still, the picture isn't changing. "Auto" doesn't appear to overcome this, either!
. . . . In attempting to resolve this problem I checked the images I'm getting from my 16Mpixel camera. The file sizes are quite modest, typically 2-3Mbytes . . . . yet looking at them in Paint Shop Pro, or Windows media viewer . . . shows that they are surprisingly sharp, even when enlarging a small part. The blockiness wasn't due to the camera.
Another tip came to light as I recalled importing nearly fourty stills once before, to make that Well-known "Fleeing Clouds" image, so much loved by travel documentaries. (probably because it puts some movement into what would otherwise be a snap of a postcard.
This is found in VS "Help" with a little digging...
For a sequence of stills, go to Import Media - select the First frame...then down the bottom of the "Import Media" (page), tick the box "Open Still Image Sequence" - you need to input the last-file of the sequence and in VS you will find the whole sequence as a single entry. Wow. That saves a lot of space and a single mouse-pull means you can drag the Sequence very easily.
FWIW it's easy enough to conclude your Travelogue by showing the same "Fleeing Clouds" image, but left-clicking on the timeline and selecting "Reverse" - others may be more-creative, but that's it for me.