Re: Problem importing an AVI file into Encore...

There are basically two options that you have. Using Premiere (or similar app, like AE) you can start a 720x576 (PAL) project/composition and either stretch the footage to fit it, or matte it so that there is a black border around the outside. Stretching may lose some quality, but the matting may look awkward, so it's up to you and what your preference is.

Regarding quality, you can output from Premiere Pro or AE 6.5 directly to an MPEG-2 file (though AE doesn't have VBR encoding). The alternative would be in making another AVI and then letting Encore encode the MPEG-2, which probably wouldn't look that bad, but the fewer times you re-encode the video the better.

Also pay attention to the frame rate and fields. If your footage is full NTSC (720x480, 0.9 PAR, 29.97 fps), you may have to make other adjustments to how you output it that will affect the quality.