Problems with fast motion

My source footage is a self-contained DV file (625i).

I want to encode to QuickTime and Windows media. Using the presets in Episode, I want size 640x360, bandwith 1 mbit. For QT I'm using H.264, for WMV it's WMV9. No audio in source.

But when I look at the result, the fast motions look terrible. I have never seen this before and I've done quite many compressions using Episode. The footage contains sign language. Playing the footage in QT player it looks as good it can. (Playing back interlaced footage on computer is never optimal...)

I have double-checked the source interlace (bottom field) and it still looks terrible. What should I do?

Should I NOT de-interlace?

I'm running Episode desktop 5.1.2 on an Intel iMac with OSX 10.5.6.

Yes, "terrible" needs a bit more of a detailed description.
Maybe you need to modify the deinterlace settings for this particular source. It's hard to offer help without details though.