Extremly poor quality importing HG20 avhcd video to iMovie 8

Just bought a refurbished intel Mac Mini to do a limited amount of video production (very short videos.) Its a 1.8mhz which I dropped a 7200 rpm 320 gig drive, and maxed out the 2GB of ram, OSX 10.5.
When I import video it comes out - to say the least - very badly. Its looking compressed to the absolute maximum with big jpeg artifacts, and comes out downright psychedelic looking. You basically can't see what anything is unless it and the camera are not moving.
I managed to try it both from the camera and loading from an external hard drive. I tried both at full resolution and the reduced resolution. Same results.
Another issue is that when the video import window comes up, it does so very slowly, as in it takes about 10 minutes to expand to full size.
Any ideas? Would getting iLife 09 work better? Sadly maxed out MacPro is beyond the budget right now.

.. where or how do you judge pic quality...?
your miniDV device is meant for TV delivery.. the preview window in iM is just a preview.. your 24"er has 4 - 8 times the resolution of PAL, so watching PAL in fullscreen doesn't increase quality
or, what are your export settings for watching your project.. ?
... and if MM2 offers you a better quality, why not using it...?

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