What is the frame rate of your source? And to clarify, you did mean 1080p, not 1080i, correct? It appears to be some kind of cadence issue. My initial thought is that pull-down was not properly enabled. Also, you should try transcoding the source from 1080p to uncompressed 480p first, then try the MPEG-2 compression to see if that helps. Compressor 2's image processing features can be buggy, but I thought most of the issues were fixed with the last update.