Im new to alot of this but here is my question

I have a new sony SR12 and shot in SD so I can play with edit and stuff faster than HD.

So here is my question When I download the mpeg2 from the camera and play in windows media player the images look fantastic.

But if I edit in vegas (movie studio platinum 8) and render out to a AVI or WMV or MPEG2, the image quality does not look as good as the original.

I notice in the owner manual the SD compression is MPEG2-PS.

I really dont know what Im doing so could some one tell me what the project properties should be and then how shoul I render to get best playback?

Thanks for any help.