It is important for me to retain HD and Dolby Digital. I am pretty good at using VS11+ so I definitively don't want to give up.
That's good, this is the only method I've found to be fairly reliable editing avchd.
I would use a short 2 minute test avchd video to get use to this process.
Start VS11+, Preferences (F6) render quality = Best, assign the working folder etc.
Turn ON "Create Proxy File" for files larger than 720x480 and assign a directory on a ntfs drive.
Let VS use it's default settings for creating the proxy file. The project settings don't appear to be that important when using proxy files. I have mine set on the default avi framebased 320x240.
Insert your xxxx.m2ts video file. VS11+ will start creating a proxy file, when VS11+ is done making the proxy file there will be a small icon inside of the thumbnail on the timeline (also I think in the library clip).
Save the project. VS11+ has to make the proxy file first (completely) before using it for smooth editing. To view the process of the proxy file creation goto "Tools -> Proxy File Manager". You will see the progress of the file being created. Depending on the length of your source video this may take sometime to create.
After the proxy is created under Project mode you should see smooth previews for playback, even for edited portions of the video.
After you are finished editing the project to create an AVCHD file that's the same as the source video goto "Share -> Mpeg Optimizer", select details to see what VS is going to recode the file as, only the edited portions will be re-encoded in the video (this is using smart render).
Click on accept, before saving the video I also click on "Options" and turn off "Playback Video after Rendering", because it's avchd and not necessary.
Be patient when VS re-encodes the new avchd video to the same video/audio parameters as the source avc/h264 video. Sometimes the program may appear to be idle or not responding when actually it is performing calculations in memory.
On my system when using the above process and re-encoding avchd I cannot drag any windows on top of the VS11+ window. This causes corruption on my display and the program does stop responding.
The other questions about saving the video in other formats from the timeline cannot natively in the HD-Mpeg2 format with Dolby Audio.
You can make a standard dvd in 16:9 with the Dolby Audio 5.1 @ 448kbs.
I would never select the HD-WMV codec for this.
There are 2 or 3 other methods you could use to convert the Avchd to hd-mpeg2 and retain the dolby audio. I could cover that later.
