PPro handles MTS just fine. No need to convert to another format and it won’t help if you do. CS5.5 even has Canon presets for sequences that work great. Sounds like the footage you have was shot at a low bit rate. I think the Canons that produce MTS files top out at like 24mbs and while that is easy to work with the modes beneath that could get really sketchy. Haven’t ever shot anything less than 24 so I can’t say for certain.