Thanks for your responses guys. After about 5 hours of searching these forums and the web I finally found my answer.
The answer came from Dave LaRonde in a separate thread:
“Dave’s Stock Answer #1:
If the footage you imported into AE is any kind of the following — footage in an HDV acquisition codec, MPEG1, MPEG2, mp4, m2t, H.261 or H.264 — you need to convert it to a different codec.
These kinds of footage use temporal, or interframe compression. They have keyframes at regular intervals, containing complete frame information. However, the frames in between do NOT have complete information. Interframe codecs toss out duplicated information.
In order to maintain peak rendering efficiency, AE needs complete information for each and every frame. But because these kinds of footage contain only partial information, AE freaks out, resulting in a wide variety of problems. ”
I assumed that my source.mov file was in perfect condition since it played perfectly, however it used to be a .mp4 file which AE could not read properly (not sure if thats standard behavior or not). So I ended up exporting source.mp4, and using h.264 for the codec. Once I reverted back to the original .mp4 file and exported with animation at 100% quality my problem seems to have gone away.
Though unfortunately now I am out of hard drive space, and I suppose that is something none of you can help me with. Haha. Thank you very much for your time.