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Here is John Rofrano’s response from the Creative Cow forum:
>>In Vegas 7 and earlier the Sony AVC encoder only had support for PSP size renders. Starting with Vegas Pro 8.0 it has support for full HD 1920×1080 Blu-ray rendering. YouTube and Vimeo require only 720p so Sony AVC is perfect for this as long as you have Vegas Pro 8.0 or 9.0.