I am getting little lines artifact lines on my cineform video clips, that I have created at 'High' quality on conversion, when I increase the sharpness in Vegas. This doesn't happen to the original video file. Should this be occuring on High, or do i need to run it at 'film scan' quality to avoid getting these artifacts. I am using Vegas 8 with an HV20.

Attached is a sample of my defect. exact same amount of sharpening has been applied to both clips, however one is the cineform file, one is the raw m2t clip.

Do the experiment yourself, then you will know.

I tried at film scan and film scan 2, but the artifacts are the same

Well this suggests something else is going on, not a compression artifact. Send support (CC me) your source M2T and one CineForm transcode, along with product type and version, Creating Application and class of PC that created this. ASAP as Thurday and Friday is a holiday at CineForm.