Sony Vegas 8 is Playing Videos at a Really Pyoor Qualit. EDIT

Hello everyone. I just bought (more like downloaded) the full version of Sony Vegas Pro 8.0b and the it plays videos in an extremely poor quality. I have searched all over YouTube but the videos only teach me how to make the video in a higher quality after the video has been created. I make anime music videos (yes, I love Anime ^^) and Windows Movie Maker seems to play in a better quality... I'd love it if someone can help me with this. If you need a screenshot tell me. Thank you.

EDIT: http://www.youtube.com/watch?v=o1k4JgmMn64 .Hope this helps.
^^^Video has been removed.

EDIT2:
OK, I figured out that I needed 1GB ram for Vegas 8. So I've got Vegas 7 now but it will only import audio? Can someone help me please? Thanks.

EDIT3: Got it. I had to convert the .AVI file into .WMV. For anyone who wants to know how to convert videos, give me a PM. Sorry for this useless thread.