blur mpg-2 / customizing wmv

[resovia]

I am new to VideoStudio and have been experimenting with X2 for almost 3 weeks. I use a quad core PC with 640 GB storage, 3GB memory running 32 bit Vista Premium. I am happy to finally leave Pinnacle behind but I have a small challenge with Studio that I am hoping someone else solved already.
I have a Sony HD camcorder that records AVCHD files to internal hard drive (1440x1080, 29.97 fps, upper field first, 16000 kbps variable). I had no issues with importing these files and editing them once VS created proxy files. I also was able to create a great looking AVCHD DVDs without visible loss of quality. Unfortunately I typically don¡¦t burn any DVDs but keep all my files on a Home Server and stream them to two Xbox 360s that are connected to my HD TVs. Since I use the Media Center a lot, the first format I picked was mpg-2. After reading through a lot of posts I settled on creating file using following setting: 1440x1080, 29.97, 20000 kbps constant, 100% picture quality, best encoding quality, no smart rendering ¡V this produced relatively small size file, with very good quality, however, there is a visible blur on few parts of the footage where camera is moving quickly (blur is not visible on the original footage) . I played with various setting but was not able to eliminate that blur. I then tried wmv format which produced perfect output but the file size was double of the mpg-2 file, in addition the bit rate was something like 87,000 kbps so I have a concern about bugging down my network when I play these files. I used the default 1080 HD wmv profile for my test. Now to my my questions:

1. Any idea on how to eliminate the blur in the mpeg-2 file? It was not there when I created AVCHD disk so I know VideoStudio can produce a perfect output. What setting can help with that issue?
2. How do I customize the original 1080 HD wmv profile to create a smaller file? When I go to create a custom file and pick wmv format, there are a lot of profiles listed, but I am not sure which one is used for the default 1080 HD. In addition, I tried creating a new profile with what I thought where right settings (resolution, fps, bit rate etc ) but when I played that file back there is no video, only sound. Any information or links to other posting on topic of customizing wmv file are greatly appreciated.