Hello Mark, I have the same setup as you, except I upgraded to the purchased version of power director 6.
I have never seen the problems you are having. I will just ask a couple of questions:
When you import the video files from the JVC camera, they are .TOD files right? I first copy the .TOD files to my hard drive instead of importing directly from the camera. Anyway, when you import into Powerdirector, you are asked if you want to convert to mpeg2. I select "Yes". The files are imported as mpeg2 videos. Then I bring them into the powerdirector editor and they work fine. The output to DVD has always been very good quality. Be sure to look over carefully the DVD options when getting ready to burn. Perhaps one of the settings for burning is at a lower quality, be sure the burn is not set to PAL. it should be NTSC.
Other than that, I don't know what else could have gone wrong.
Oh, by the way, I was having some jerky video in the editing window, (not the DVD output) and I solved it by right clicking on the video in the timeline, and selecting "set TV format", and then choosing "this video clip is progressive (non interlaced)" That solved the problem of jerky playback during editing. As far as bad output, I never had any issues with that.
Donald