My Video look blurry and Pixilated in Premiere Elements 10

I am starting to work on a new video using Adobe Premiere Elements 10. I just purchased a new Toshiba Satellite L855 laptop. It has an Intel Core i5-2450M Processor running at 2.5 GHz. I have 6 GB of RAM and over 500 GB of free space. I am running Window 7 with 64-bit operating system. The files I am placing in my video are MP4 Video (.mp4), MPEG Movie Clip (.MOD), and Video file (.wmv). The videos look great when I play them on my computer, but when I import them into Adobe Premier Elements 10, they are blurry and pixilated. What am I doing wrong? Thanks for any help you can give me.

I'm not sure, but I think I know the answer. And, I have a very similar computer.
Is there a red line above the time line? There should be when you are using multiple file types.
When you start a new project you asked for a "project preset". PrE10 uses that to make preview video for the editing process. If there is a mismatch between your preset and the first clip you bring into PrE10, it asks you to change so they match. With three file types, it can only be right for one. When you bring in clips of the other two types, PrE10 has to "preview render" in order make the monitor previews run smoothly. It does not do that automatically. It puts a red line above the clips that need it. Then anytime you press the Enter key, it will stop everything and "preview render" your content. It can take awhile. But, after that, your preview should look better.
You didn't say what the target output will be. When you work through to the Share menu and select what you are going to make, PrE10 goes to work doing a "final render". That's because what is needed for a Blu-Ray is different than for a DVD or posting to YouTube is different than making video for a website. The "final render" starts all over and uses you project as markers and paths to your original clips. It goes though frame by frame and makes new frames using the "final render" settings. And, it can take its time doing it!
Unless you buy a super computer, you may have to put up with a little less than perfect in the preview window. The real test is how the final output looks on the device you want to use as a viewer.
Bill

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Read these previous discussions
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- and http://forums.adobe.com/thread/883419?tstart=0
User Guide PDF http://help.adobe.com/en_US/premiereelements/using/index.html
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Steve's Basic Training Tutorials http://forums.adobe.com/thread/537685?tstart=0
Tutorials http://forums.adobe.com/thread/498626?tstart=0
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