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The PD 170 instruction manual says: "If you use the digital zoom function, the picture quality deteriorates."
So, the blurrie is normal and you are not doing anything wrong. I’d suggest you disable the digital zoom by going into the menu.
If you have a 2X on there plus the digital zoom of 24 or 48, you may be getting a zoom ratio of 48 or 96! Just let your eye be your guide in terms of how close-up you want your image to be and you’ll be fine.
I’m a newcomer to the PD 170 having been using VX2100’s. The first thing I do with any new cam is disable the digital zoom; only use I can see for this is if I want to create some unique background palettes. The second thing I do is disable the red light indicating I’m in record mode. Subjects are more self conscious with the light on; better video if they are not. With this series of cams, it is very convenient to activate both the LCD and the viewfinder; e.g., if using viewfinder and you need to flip-out to reach the menu button while shooting, the viewfinder image does not cut out.
Lastly, I became a huge fan of the AE button conveniently on the back of the cam during a 40 bands benefit extravaganza in Baltimore Dec 1-2 (Night of 100 Elvises). It has always been a problem adjusting the exposure via iris control (i.e., f-stop) with the 2100’s, with the flip out LCD screen in certain angles (extreme angles I must admit; if you just do normal angles, this wouldn’t be noticed); it just blocks access to these controls. The convenient AE shift button plus wheel control at back of cam on 170 permits exposure adjustments at +4 to -4 increments with a locked in shutter speed (use 30th for my version of a "film look"). Hooray for this. It made adjusting for powerful spotlight on performers’ faces a snap, without the need to constantly zoom in for face close-ups in order to lock-in exposure to adjust for the overbright face.
The PD 170 will not disappoint.
REGARDS … TOM 8)