FCP exporting blurry...?

I am importing .mov files that someone is capturing using Camtasia. When I import it into FCP its looks great in the viewer. The text on the pages that are in the video are nice and clear, but when I view it while editing and view it in the canvas its blurry, even after rendering or if i export it.
I also have tested it in imovie and when i export it in imovie or view it in imovie, it looks great.
Why would there only be a problem in FCP?
mov i am importing is:
H.264
1040x858
even when i make the sequence settings those exact settings it does not look right nor is it even clear.
any ideas?? why would imovie do this WAY better than FCP??

Matt,
as noted you are trying to edit a format that is a delivery not an editing format, H.264 that is.
For a full list of editing formats check out FCP Easy setup.
Also your frame size and pixel aspect (0.682) are not standard (In sequence settings, Command+0, you'll find a list of settings for standard frame size and pixel aspect ratio), however, if that is the frame size you want you can indeed customize certain settings.
Main point is that FCP will work best if you convert your H.264 material to an editing format like DV or ProRes (you could use [this free application|http://www.squared5.com> for that purpose).
Here a useful tutorial on how you could get started with mpeg streamclip:
http://discussions.apple.com/thread.jspa?threadID=2070861&tstart=0

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