I'm splicing avi (divx or xvid) video clips into a HQ mpeg2 (vob) DVD-rips using Sony Vegas and then render to mpeg2 using the Vegas main concept codec (using 640x480 resolution). I noticed that even with very high bitrates the video parts from the avi file become very pixelated although the pixelation is not as visible when I watch the avi file by itself in a player. The avi file has lower resolution than what I'm rendering to, is that perhaps the cause for the pixelation effect? If so, what filters can I use to reduce these effects (I do not want to render to the lower resolution)?

Should I maybe not use the main concept mpeg encoder and render to divx or xvid?

Any other tricks/suggestions are welcome!