How do I output the smoothest video when changing or mixing frame rates from the original footage?

Question

I have been experimenting with various Media Encoder settings, and wondered if there was anything else I can try to get the smoothest video output possible, especially when changing frame rate and possibly resolution.  For clarification, let me start from the beginning and explain what I'm doing and what I've tried so far.  I'll try to be as brief as possible, but if I do go into too much detail, I apologize. 
My original footage is AVCHD 1080p - 60fps.  (my camera only does 60fps...specifically 59.94fps)  We're not talking interlaced video here, I'm staying away from that.  This is definitely full frame, progressive video at 60 frames (not fields) per second.  My output will ultimately be for the web.  I have been keeping my output codec (H.264) and bit-rate (VBR 2-pass, relatively high-bitrate) consistent, and have been trying numerous output options and even sequence settings to see what would yield the best results.  I am using Premiere Pro CS5.5 along with Media Encoder.  Here's what I've done and the results I've observed:
1.  I created a sequence with 1080p - 59.94fps settings to match my original footage.  I then output both 1080p and 720p versions at 59.94fps, and at 29.97fps.  The 59.94fps output files looked absolutely great, as would be expected.  Extremely smooth.  The 29.97fps output files were generally smooth, but not near as smooth as the 59.94fps.  This is expected since it's half the frame rate as my original footage.  However, my question is this:  What exactly is Media Encoder doing when "down converting" from 60p to 30p?  From a technical stand point, is it dropping every other frame?  I'm just curious to understand exactly what it does.  I tried the Frame Blending option as well, and that only yielded a bit more blur to the images which wasn't desirable for any of the output files. 
2.  Just to see what would happen, I created a sequence with 1080p - 29.97 settings.  I then output both 1080p and 720p versions at 29.97fps.  The video was much more choppy in these cases, even with Frame Blending on.  Now, I know not matching my sequence settings with my original media isn't ideal, but I again just want to understand why this yields less smooth video than the 29.97fps options above.  Why does cutting the sequence settings frame rate in half from the original, then outputting the same frame rate as the sequence yield video that is not as smooth?
3.  Next, I wanted to try mixing frame rates to see how Premiere and Media Encoder handled the footage and output files.  Premiere handled it great, no issues there.  However, I had some interesting things happen when I output the files.  Here's what I did:  I created a sequence with 1080p - 59.94fps to match my original footage.  Then I took the same exact footage that was in my sequence, copied it in my project panel and interpreted it at both 23.976 and 29.97 fps, yielding slow motion video.  The slow motion video looked great in Premiere, so I went ahead and just added it to my sequences, along with the original 59.94 footage.  I also created separate sequences for the 29.97 and 23.976 footage respectively, each with matching sequence settings, then added a nested sequence to another original footage sequence (with 59.94fps sequence settings) to see which yielded the best results.  Basically, I'm trying to output 59.94fps that match my original footage, but also throw in some slow motion footage at different framerates.  I'll explain my results in a moment as they are a bit convoluted, however, here is my question:  When mixing frame rates and trying to output the smoothest video, am I going about this the right way?  I would assume you would use your sequence settings that match the original footage (which is what the majority of the footage will be), then bring in a nested sequence for the slow motion (as oppose to just dropping the slow motion video directly into my main sequence), and then output to the same frame rate of the majority of the footage, in this case 59.94fps. Is there a better workflow for this?
The results to #3 above were as follows.  Initially, it looked like it didn't matter if I nested the slow motion sequence into my main sequence, or simply dropped the actual slow motion video into my original 59.94fps sequence.  It seemed to produce smooth results either way.  Frame Blending blurred the video a bit, but didn't seem to make much difference, and quite honestly I like the footage without Frame Blending in general.  However, when I closed down Premiere, and opened the output files later (opening in Quicktime), the footage looked choppy.  In fact, it would go from choppy to smooth and back, almost like it had an irregular cadence (don't know if I'm using "cadence" in the right context here).  I would then open up Premiere again, import the output footage into my project panel, and play the footage in Premiere, and it would play back smooth again. Is this a Quicktime issue?  I was playing 1080p 59.94fps files when this happened, so maybe it's just because it's a large file.  Doesn't seem to have issues with the 720p files I created.  But it sure threw me off with my testing because I then started second guessing the settings I was using.  My iMac is the latest 2011 model with plenty of RAM, so I wouldn't think it's the computer.  Thoughts?
4.  Next, I noticed on ALL my output files (again, using the H.264 codec from Media Encoder) that the color of my video seemed to flatten quite a bit.  It seems that the original footage has more contrast and saturation than the output files.  I figured maybe this was just how it was, but when I re-imported the output files back into Premiere, they looked IDENTICAL to the original footage.  And in Media Encoder's Source/Output windows, I don't see any difference there either. Is Quicktime again the culprit here, doing some odd things to the color of my videos?
5.  Regarding Frame Blending, when is the best situation to enable this option in Media Encoder?  I've read it is when mixing frame rates, but I honestly didn't see too much of a change except for a bit more blur, which I didn't care for.
6.  Lastly, my conclusion is that 60fps yields the smoothest video, which is an obvious conclusion.  However, I know that 60fps isn't the best or easiet frame rate for web delivery.  It seems 30p is more the standard.  Are there any integrated web players that would play 60fps?  Can you get 60fps video on YouTube/Vimeo?  If yes to any of these questions, can they do 720p and 1080p at 60fps? 
Those are all my questions.  I hope I am clear enough without being overly wordy and hopefully I didn't put too many questions into one post.  Thanks in advance for any insight, I really appreciate it.

Answer 1

Did you ever figure out which output worked the best? I have the same original footage; trying to determine the best output settings to make a dvd for tv.
thanks!