I took some files from my camera to my friend's house to try out Premiere. He has CS4 on Windows and Mac, and CS5 on Windows.

On all versions, the video playback is somewhat garbled, like the compression isn't working quite right. You can tell when a keyframe hits because the image is normal momentarily. It's not jumpy/glitchy, it's just got what look like really bad (but mostly non-moving) compressions artifacts.

Has this been fixed? I'm considering Premiere, and I want to know if this will be a problem.

This is normal behavior with all but the fastest systems with a CUDA card and GPU acceleration enabled either natively or via "The Hack" (CS5 Only). I find it's better when you set the playback resolution to 1/2 or even 1/4.

But everything's perfect upon export.

Ok, thanks for the help.

Premiere must be inefficient, since VLC can play the stream fine even on a fairly slow computer that I have.

Chances are that the incorrect sequence preset is being used. For example, if I place a 60i AVCHD clip from a Sony XR500V into an XDCAM EX sequence, the video looks like garbage. But if I use the AVCHD 60i preset, then it looks great.

Chances are that the incorrect sequence preset is being used. For example, if I place a 60i AVCHD clip from a Sony XR500V into an XDCAM EX sequence, the video looks like garbage. But if I use the AVCHD 60i preset, then it looks great.

By garbage, do you mean just bad compression artifacts, or something actually wrong with it (garbled)?

On all versions, the video playback is somewhat garbled, like the compression isn't working quite right.
Right click on the video in the Source panel and choose Playback Resolution and set it to Full. Repeat the same steps for the Program panel.

When you edit AVCHD you dont want to use CS4. In CS4 all AVCHD lives in the incorrect color space making colors off. This is isue among other AVCHD related issues are fixed in CS5. The performance in CS5 when working with AVCHD (or any other format) is superiour to CS4.