It looks OK to me, it looks a lot lower quality than the source because it's being compressed a lot, the settings you are using are for "low quality" download, and it might even be re-encoded by Myspace to flash format or something.
This quality is fine for the 'net, the file is a good size, there's no problem there. If you want higher quality for the web, encode with a higher bitrate using the same codec (wmv).
If you want to export for DVD, then you are using the wrong codec, I'd recommend exporting from Premiere as DV avi (that's the format you recorded in)
This will retain the quality of the original footage, and then you can encode to MPEG2 for DVD, or whatever other codec for whatever else, see the FAQ above for MPEG2 and other encoding info.
Panasonic SD9, Panasonic NVGS-75, Canon MV600i