Thanks for your reply and apologies for my unclear statement of the problem. After a couple more hours of research I found that the problem was that Premiere was interpreting the .mts files from the C100 as interlaced. My sequence and previews were set to progressive of course so that resulted in the poor image quality in playback.
The solution was that I had to tell Premiere to interpret the footage as progressive and then everything was good.
Frustrating that Premiere doesn’t seem to work well with .mts files.
Thanks again.