Video Quality in imovie

I am capturing video using a Sony HDR-SR12 Handycam, converting the video using QT in a MPEG4 format, so can use the file with imovie. Once I transfer over to imovie the video quality is very bad. Playing the video out of the camera on to the TV the picture is perfect, also the video seems fine in the Microsoft Picture Browser.
Is this an imovie issue or a conversion issue? Any suggestions would be greatly appreciated.

Hi John
Sorry i don't have the answer, but i'm interested in your question because i have the same kind of issue when i import in iMovie 08, 09 and iMovie HD from my Sony SR10 AVCDH camera.
I just can say that when i export directly from iMovie to iDVD the quality is bad; this seems to be a well known problem and it is recommended to export video using the Quicktime with H264. With that method, i can obtain good quality in the STATIC images, but during the panoramic movements of the camera the final result (i mean a DVD on my cathodic TV) is disappointing, with a "jerky" rendering.
You can download on my iDisk an exemple of it at: http://public.me.com/leclercqpascal
When i compare with the same sequence treated on the PC Sony's software, i find in the latter case a perfectly smooth result.
The problem is the same when i import from the camera to FCE.
Help welcome, because i would be disappointed to resort to a PC software!

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