If you want to create the illusion of widescreen for your 4:3 clips open a standard project and add a black bars over the clips. There is a standard matte in the titler for this.
Export with 4:3 settings. This will be just fine for YouTube.
< CS3, for example, would require between 2 and 4 GB, depending on the complexity of the project and OS used on that machine.
Can CS3 adress more than 2 gig of RAM? Or is it still limited?
Go to the project window, select all the clips rightmouseclick, interpret footage and conform to widescreen.
That will probably set things straight.
When widescreen footage looks squished its because it’s anamorphic widescreen recorded so by your camera. Very common.
I would go for the 30p timeline. The footage from the little Pana you can deinterlace on the timeline via field options. When deinterlacing via field options Premiere automatically sets for upper field so you also need to reverse the field dominance for those clips.