Thanks again for trying to help, Ned. I had DirectX 9.0c and then dl'd and installed the newest version re the Pinnacle tech, it also didn't help.
I was just able to finad a solution for the whole thing this afternoon though and I think this should be a sticky or placed in the Pinnacle FAQ's. I found it because of your suggestion that it was a Nvidia "problem". (actually a Pinnacle software design compatibility problem with Nvidia).
I went into the Nvidia control panel and checked the settings. They were set to a custom setting with medium values for the "global" settings for Anisotropic set at 4x and Antialiazing set at about 8xQ.. this has never caused any problems with any other programs or games, anyway, I set the whole thing under Image Settings to "Let 3d application decide"
I then tried making a move from the same test project I had been using and got the same problem of distorted transitions. Then, by accident, I replaced one of the fade ins at the beginning of the project and when I made another test movie I discovered that transition was not distorted.
I then went back and replaced all the transitions with new idential ones, made a move and it works fine in all movie modes. Apparently, the card set with the higher settings isn't something that Studio is set up to handle and it gets recorded into the project and then into the movie when it is made. Seems really odd to me, but I verified by testing that that is what was happening. You have to delete the existing transitions and put them back in though.. I guess that's the only way the project can fix them.
In Navida I can set up separte settings for each program so will try setting up just Studio 10 with the lower settings when it starts and see if that works. But for now I have Nvidia control panel set for let app decide, as mentioned above.
This evening I made three new movies and they all recorded to AVI DV and mpeg with no problem.