Hey Carl,
I don’t know if you are still working on this project, but I have had similar problems trying to figure out an effective workflow. Although you’re working in Avid, http://www.kenstone.net has got loads of great articles, some of which are all about incorporating Magic Bullet into your workflow.
Firstly, which Magic Bullet filter are you applying? Are you applying it to SD footage? I presume that with those render times you are using the deinterlace filter, with deartifacting and maybe a look suite or something.. It’s important that your footage is correctly interpreted – ie, separate fields is set to off. Also when you render, render fields should be set to off if you are going progressive. Which I assume you are.. I tried exporting at full PAL quality a few times and found that the exported file was pretty soft. So now I always use the animation codec even though I end up with enormous files..
If you export uncompressed from AE then your footage should still be looking pretty good and crisp at that point. I always do my mpeg-2 encoding in either DVD Studio Pro or Compressor, so I don’t know too much about doing it through Squeeze, but looking at the settings, I would set it to 2 pass VBR with the bit rate to about 7500 and not less than about 5500. Obviously this is where you’ll get artifacting and stuff. I don’t really have problems using the Final Cut Studio encoders, so I generally go that route.
So, I think you need to figure out where the quality problems are introduced and figure out the settings at that point. I don’t use Avid, so I can’t help on that side, but I’m always happy with the AE output file I create. I did a test with Squeeze 4.3 and it looked ok.
Hope this helps and wasn’t too much of what you already knew…