MultiAVCHD - Ref frames

I've been using MultiAVCHD for a while now and it's been working fine, the show I'm currently watching has a ref frame of 10 on each episode. This is too high, but I tried it out anyway and it worked fine.

But, from episode 10 until the end of the show the ref frames on each episode are now 12 and due to this I don't get any image on the file whilst playing through my PS3. So, I opened the transcode section on MultiAVCHD to change the ref frames.

My question is, will changing the ref frames to make the video AVCHD compliant result in a loss of quality? The fact that it's in the transcode section leads me to believe so. If there is any image quality loss, is it noticeable?

I don't change anything else in the transcode section, I just leave it at 4 ref frames like it is when I open it and apply it. I leave the resolution etc exactly the same. I also chose '1 pass insane' to make it faster as it takes about 10 minutes per episode via this mode.

What exactly are ref frames? I'm not too good on this topic.