I just edited some off road footage that a friend of mine shot using his iPhone. The footage was shot in 720p and looks quite good and was easy to work with. The major problem for me was using Stabilize Media to smooth out the shots where he was walking. Some of the shots were very shaky and I wasn't able to save them with the Stabilize tool.
After stabilizing the media several times (not chained) using several options, the video continued to look like it was shot using a webcam from the 90s. Every movement in the video was wobbly and looked as if it was on top of a constant wave.
I have seen the Stabilize feature in After Effects and it is amazing what it can do. Of course Sony Vegas isn't After Effects, but I have seen some amazing usage of Stabilize in Vegas on very shaky shots that turned out wonderful.
Am I doing this wrong? What settings are recommended. Will the collective mind answer my questions?
I would start by stabilizing each scene separately and sometimes even more often than that. It's OK to split an event and just apply the stabilize to a small shaky section, then apply it again to other sections so that each different situation can be stabilized as needed.
If the footage is really shaky you may need to buy the full version of the stabilization that is in Vegas which is proDAD Mercalli. The technology in the full version has more capability that the limited version that ships with Vegas. I show you how to use proDAD Mercalli V2 in this video: