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editing Sorenson Squeeze conversion turned to crap

I used Sorenson Squeeze 8 to convert an mp4 video at 10Mbit/s to a lower 2Mbit/s. The video turned to look like this.

ScreenShot2012-07-19at114633AM.png


The image you see is throughout the whole video. The audio plays just fine. Does anyone know why this is? I need this footage into AVID but I only have time to AMA link. I want to decrease the bitrate because it's very arduous to edit.
 
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