Converting from .mts to .m2ts files with the Sony software that comes with the camera fixes the audio (endianness problem explained elsewhere on this forum), but the video is still messed up.

The keyframes seem OK, but the frames in between are messed up, so you get a sort of jumpy picture, which distorts a bit between keyframes and then looks good again when another keyframe hits (every 1/2 second).

So, how do I get Premiere to read the files correctly, and display the video without problems? It's almost right, the codec seems to just be a little off. I know the files are good because VLC can play all of them with no problems.

I think it might just be an AVCHD/CS5 playback issue. I was concerned previewing some files I was editing but noticed that they clear up as soon as you stop playback. Fortunately on export they were perfect.

What are your PC specs?

I actually tried it on two computers that my friend has (I haven't gotten an editing system yet), one is a brand new Mac with 8 cores, 16GB RAM (if I remember correctly) and a 4-disk raid-0 array. The other is a PC with similar specs. So, I don't think it's a matter of insufficient processing power. I'll have to ask him to check and see if it looks OK stepping through it one frame at a time.