Converted from m2ts into Sony AVC MP4 and got lines on objects

[dilfatx]

I have converted from m2ts into AVC MP4 and noticed that I have lines going across objects when there is movement?? Here is the video I converted.
http://blip.tv/file/get/Reyg-CristianTalkingAtZilkerPark648.mp4

I am using Sony Vegas 8 and here is a descrioption of the settings I used.

Audio: 128 Kbps, 48,000 Hz, Stereo, AAC.
Video: 2.0 Mbps, 29.970 fps, 720x480
Use this setting to create an NTSC standard definition 16:9 Memory Stick compatible MP4 file.

What do I need to do or change to not have those lines?

Im basically trying to convert into a video file type that has excellent quality to play on computer when I email links to friends and families.

capture.png

[Soopafresh]

Looks like interlacing artifacts. You want to apply deinterlacing before you resize the video to 720x480.

[dilfatx]

Looks like interlacing artifacts. You want to apply deinterlacing before you resize the video to 720x480.

How do I do that in Vegas 8? (i understand this must be an elementary question)

[Soopafresh]

http://eugenia.gnomefiles.org/2007/09/10/de-interlacing-with-vegas/

[dilfatx]

http://eugenia.gnomefiles.org/2007/09/10/de-interlacing-with-vegas/

followed the tip and still have lines.. should I have the video render into an avi and have it under the HDV settings? I changed the project settings and then went into rending and still used mp4 to render in?