I don't know why, but your clip has been scaled to 1/2 size and moved to the upper left corner. This has nothing to do with the preview window settings as that's simply showing you what the resized clip looks like.

Double click on the timeline clip to open the PiP Designer, then set the Scale to 1.00 and change the Position X and Y controls from 0.250 to 0.5 and you'll have it back to being centered and full screen.

Actually something else is going on, because your media library thumbnail exactly matches what's shown in the preview window. In that case, you must have scaled up the clip so the upper left quadrant filled the screen, so you'll still need to make those changes in the PiP Designer but the scale will likely be 2 and the X & Y positions 0.75 and 0.75 to bring that section to the center and have it fill the screen.

damn gremlins!!!!

If you have the original footage, you'd be a lot better off than using PIP to scale and reposition this footage. Since this was produced scaled as 1/4 screen, you could lose significant quality when scaled back to full screen.

Jeff