Hello John!
1. The Internal tab in the Preferences is hidden, because changing it means risk. Don’t worry about it.
2.The video example (test avchd 1920×1080 60i) is perfect! I don’t see any quality problem. It is smooth, nothing pixelating.
3. I am in Europe, we use the PAL system templates (1920×1080 50i). You have to use the NTSC system. It is OK. But rendering for the YT with 18 Mbps bitrate is unnecessary. YT decreases the bitrate significantly. I suggest using the original template. My camcorder (HDR CX700VE) records m2ts files (1920×1080 50i), I edit them with Vegas 13.
I don’t know why you see quality problems viewing the uploaded file. It is perfect.
Francis S. Dobos