MPEG-4 video file format and IMOVIE.....help!!

I am completely new to IMOVIE and I am trying to import and DVD into it. I used ROXIO CRUNCH to convert a VIDEO_TS folder to use in IMovie. It converted it into a MPEG-4 Video file which is completley pixelated and not viewable. However IMovie did let me import it. What do I need to do?

Handbrake includes a universal setting which makes the video compatible with the iPhone/iPod, Apple TV, and with iTunes on your computer. It also includes an iPhone/iPod compatible setting.

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