PE7 and Sony HDR-XR520 help

I apologize up front if this issue has already been discussed but I cannot seem to find a solution.  I have a little very amatuer editing experience with a different program and different camera, but am very green when it comes to editing and knowing what to do or options available.  As noted, this is what I have:
Premiere Elements 7
Sony HDR-XR520
Issue: When I attempt to add movie clips to the sceneline they group together and I cannot ungroup them.  Also, when I play back the clip on the computer in PE7, the audio sounds fine but the video is choppy.  The closest explanation I can find is that this has something to do with the surround sound or that the video was shot with the 5.1 audio.  The camera has the 2ch audio option but we did not realize this would be a problem until we went to edit.
So, I guess my main question is, can video shot with this camera be edited using a computer software like PE7 and avoiding the above problems?  If so,which software and how?  If it has to do with the fact that this footage is shot in 5.1, is there a way to output it in 2ch though it was shot in 5.1?  Can I record the footage from the camera to DVD using the computer?  Do I need a different program?  I am not sure what else to ask or info to give; I am stuck at this point.  Maybe someone has some suggestions..
Thanks in advance

Your camcorder is an AVCHD camcorder. You add the video to your project by using Premiere Elements Get Media, from AVCHD
and downloading it over a USB connection to your computer.
It's very important that you make sure that your project us using the correct project settings for your camcorder! These settings can only be made when you first open your project. If you are shooting in 5.1 audio, you must select the AVCHD preset for 5.1 audio or you'll get the strange behavior you're describing.
According to the specs I've found, your cam shoots in 1920x1080. Make sure you choose this preset and not the 1440x1080 preset.
I've created a free 8-part tutorial series for videomaker support site Muvipix.com called Basic Training for Premiere Elements. It's a great introduction to the program for a newby. Part 1 should be particularly interesting to you, since it describes how to select the right project preset for  your camcorder.
While you're there, check out the extremely knowledgeable and helpful Community forum as well as the over 1000 tips, tutorials, motion backgrounds, DVD menu templates and licensed music clips -- many of which are free and even more of which are available for a small annual subscription.

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