Comparing Premiere Elements 2.0 to Premiere Elements 7.0 in regards to MOD files, something has gone wrong in the editing workspace in 7.0.
Even after doing a workaround of renaming ImporterFastMPEG.prm to ImporterFastMPEG.prm.tt and deleting all the index files that are created when you add MOD files for the first time to Premiere Elements, there are considerable artifacts when playing unrendered previews. Although, if you render a preview they are gone.
However the artifacts are not the same as the distortions I was talking about earlier. The distortions are big blocks of video that shift out of place. Those distortions are gone when you rename .mod to .avi, or if you do the workaround of renaming that ImporterFastMPEG.prm and deleting the index files. But neither of those two tricks get rid of the artifacts during playback of unrendered previews.
When you rename .mod to .avi, Premiere Elements uses the Directshow merit system to pick the mpeg and ac3 codecs. For example, if you have FFDShow installed with MPEG2 enabled, Premiere Elements will use that to decode the video. If you don't have a separate ac3 codec installed on your system, then you won't have any audio when you import the file into Premiere Elements. You could enable AC3 in FFDShow Audio and Premiere Elements will use that.
Still, even with a 70 minute video clip on the timeline, I don't seen any errant green pixels. And all I have is a Pentium 4, 3GHz, 1 GB RAM with 96MB shared RAM for video.
By the way, are we all talking about standard definition or high definition MOD files? I'm only talking about standard definition.
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