What is the best proejct setting for editing h.264 video?

I have captured hours of VHS footage via an Elgato Video Capture device for Mac.   Captured video is in H.264 format.
Trying to edit the video in Adobe Premiere Elements 10, but it is being very fussy.   Takes a long time to import media.  Once in and a few cuts are made, timeline drags and freezes repeatedly.   This was with a setting for HDV 720p 30.  
Is my problem with the project setting?  I hope so.  But I also hope I can figure out what the proper setting should be.   Any thoughts?
Footage is decades old.  Not the best quality, of course.  I do want the final project to look as good as possible and be in Widescreen for uploading to Youtube.

Here are the propertites of the captured video:
Format                           : MPEG-4
Codec ID                         : M4V
File size                        : 1.37 GiB
Duration                         : 2h 1mn
Overall bit rate                 : 1 613 Kbps
Movie name                       :
Recorded date                    : 2013-08-22
Encoded date                     : UTC 2013-08-22 13:15:21
Tagged date                      : UTC 2013-09-01 07:00:53
Writing library                  : Apple QuickTime
Cover                            : Yes
stik                             : 0
tvnn                             : S-Video Input
iTunMOVI                         : <?xml version="1.0" encoding="UTF-8"?> / <!DOCTYPE plist PUBLIC "-//Apple//DTD PLIST 1.0//EN" "http://www.apple.com/DTDs/PropertyList-1.0.dtd"> / <plist version="1.0"> / <dict> /     <key>asset-info</key> /     <dict> /         <key>file-size</key> /         <integer>1467486295</integer> /         <key>flavor</key> /         <string>4:640x480</string> /         <key>high-definition</key> /         <false/> /         <key>screen-format</key> /         <string>standard</string> /         <key>soundtrack</key> /         <string>LC</string> /     </dict> /     <key>cast</key> /     <array/> /     <key>codirectors</key> /     <array/> /     <key>copy-warning</key> /     <string></string> /     <key>directors</key> /     <array/> /     <key>producers</key> /     <array/> /     <key>screenwriters</key> /     <array/> /     <key>studio</key> /     <string></string> / </dict> / </plist>
Video
ID                               : 1
Format                           : AVC
Format/Info                      : Advanced Video Codec
Format profile                   : [email protected]
Format settings, CABAC           : No
Format settings, ReFrames        : 3 frames
Codec ID                         : avc1
Codec ID/Info                    : Advanced Video Coding
Duration                         : 2h 1mn
Bit rate mode                    : Variable
Bit rate                         : 1 499 Kbps
Width                            : 640 pixels
Height                           : 480 pixels
Display aspect ratio             : 4:3
Frame rate mode                  : Constant
Frame rate                       : 29.970 fps
Color space                      : YUV
Chroma subsampling               : 4:2:0
Bit depth                        : 8 bits
Scan type                        : Progressive
Bits/(Pixel*Frame)               : 0.163
Stream size                      : 1.27 GiB (93%)
Language                         : English
Encoded date                     : UTC 2013-08-22 13:15:21
Tagged date                      : UTC 2013-08-22 13:15:21
Audio
ID                               : 2
Format                           : AAC
Format/Info                      : Advanced Audio Codec
Format profile                   : LC
Codec ID                         : 40
Duration                         : 2h 1mn
Bit rate mode                    : Constant
Bit rate                         : 110 Kbps
Nominal bit rate                 : 128 Kbps
Channel(s)                       : 2 channels
Channel positions                : Front: L R
Sampling rate                    : 48.0 KHz
Compression mode                 : Lossy
Stream size                      : 95.6 MiB (7%)
Language                         : English
Encoded date                     : UTC 2013-08-22 13:15:21
Tagged date                      : UTC 2013-08-22 13:15:21

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