[Michael Letzring]

No frame blending.

To answer my own question: I took a slightly different tactic and brought the RAW image sequence into LR4 where I made them into DNGs, went back to AE, imported the now DNG sequence, dropped that sequence into AME and it rendered flawlessly to h.264 1080p.

Not sure what the issue is but I realize that Adobe only started supporting this Panasonic RAW format in the most recent camera raw update. For the moment I seem to have a work-around.