I dont think this will surprise anyone here. I tried all the suggestions without success. So in my frustration I decided to download the 64 bit version of Vegas pro 10 trail version just to see if it was bad video clips or just buggy software that was intentionally crippled.
The 64 bit Vegas 10 pro works flawlessly. Dang it!
Well it is only money I guess. I if I had all the money I have wasted on cheap versions I could have already paid for this great one.
Thanks to all for the comments and assistance. I expect my new HF G10 will yield much better video files.