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just browsing and found ur post although a little old
i assume you are using a iLINK or ieee 1394 cable to your firewire input.
i think you are getting bad quality due to your importing settings. you are probably importing as mpeg1 by using the Ulead interface. look at the settings on import and see if it will allow you to import as an AVI files. this file will be the purist file for editing.
if Ulead doesn’t let you import to AVI, then search the internet for WinDv, this little freeware program is great. before i purchased Adobe Pro 2.0, i used this and the guy that programmed it should be given an award. it is simple, fast and imports to AVI.
after importing, then simply use your editor with the saved AVI files for your final product.
your system is a little under powered for a video editing system, try at least a gig of ram, and check and make sure your video card is on full settings.