The Focus effect will achieve nothing.
The problem here is that Video Studio is not that good at re-scaling still images. The fix is to re-scale using your imaging software. Re-scale the image to 360x288, save and then insert that into video studio.
You will notice the difference.
COMPAQ something or other with 500Gb Boot Disk, 1Tb external Firewire Disk, 4Gb Memory and a super duper sound card, 19" TFT Monitor etc etc etc
Sony TRV33e : Sony TRV310e : Canon XM2
Sony Vegas Studio editions to v11
Remember, there is always more to learn than there is to teach.