Hi Jon,
After some time I think I’ve figured out what’s going on.
The AVI file the client gave me was recorded using ZD Soft screen capture, using an Xvid Codec. It looks great in WMP or QT as a stand alone file but as soon as I try to import it into any Editing application (AVID, FCP, Premiere) they pick up on all the artifacts within the codec, and the the resolution drops.
After many, MANY different attempts we finally managed to use FCP to create a project at the file’s native settings, 1024 x 576 then render the sequence using the animation codec. Then exported the sequence as a QT file using the same codec. This gave me a QT file that AVID recognizes and looks ok. Although I have to say it’s not a great result, but a workable solution.
Looking forward I need to find a screen capturing application that creates AVI’s using a format and codec that can be edited with.