LOL! RISE UP my friend!

Getting a second (and third) opinion on the internet is usually VERY important. No worries.

I agree with the other posters about needing more horsepower for editing or previewing, and about using an intermediate file conversion (including what you can render natively within Vegas).
However just a question about your settings when you originally saw the flickering problem in your preview and your rendered output. What was your deinterlace setting in the project properties? Did you experiment with the choices for that setting and do test renders while changing no other setting?

Settings
 

Jay,
Thanks for your input. I did try different deinterlace settings to no avail. I'm just really dissapointed that with 6 gigs of ram, two fast and big HD's and a 2.4 Gzh quad core cpu, I can't edit AVCHD lite. I did mention it was "lite" didn't I? As I posted before, It's not stuttering or dropping any frames. I'm only getting the weird flicker in the preview window and final render. No flicker when played outside of the preview. I guess I'll have to get Cineform. Thanks again.

Here's a second opinion (that's not very debatable really). AVCHD (lite or otherwise) takes just a whale of a lot more CPU horsepower to edit than DV (from a GS-250 or any other MiniDV camcorder). It's not even close.

My editing rig (less than two months old) has 12 GB RAM, a 2.66 GHz Core i7 CPU, etc. Yet it still has issues with AVCHD Lite. Worse than the occasional playback stutter is the random Vegas crash.

Unfortunately, you will need to transcode the files for a satisfying editing experience. You can do a batch render within Vegas to whatever codec you choose (or just get Cineform or AVCHD Upshift). I've done the transcoding within Vegas using the batch render scripting tool and it has worked okay. It may not be the "best" workflow, but at least it works.

Problem solved!
 

O.K. After many hours of arduous heartache and tedious research, I finally came across a post on another site concerning my specific problem. It turns out that there is a bug I SAID BUG, in Vegas 64 bit Pro 9 “c”. I simply reverted back to “b” and all is very well. With my rig specs I’m able to preview at the highest setting, edit, render and no transcoding with absolutely no problems. This has been documented and actually Perrone, you were part of the thread on the other site. I’m wondering why you didn’t point that out to me when you saw my post looking for help here. Hmmmm. Anywho, all I care about is now I can run Vegas and edit AVCHD lite with no problems. Thanks again to all!