I have made time lapse image sequences and converted them into mov. files in quicktime pro (1920x1080 H264). The footage doesn't look great since quicktime hasn't picked up cr2 files, but when I import the footage to afx cs5 they look even worse and visibly more pixelated.I am going to project this across 8 meters stage. Could this be some importing preferences issue?
Not sure about the import preferences (make sure that they're interpreted as progressive footage?) but I'd definitely recommend importing your image sequences directly into AE if quality is a big concern.
I don't have experience with cr2 files personally but the AE help seems to indicate that they are supported. There may be some more helpful information for you here: