After seeing countless threads about what settings to use in vegas, I thought I would share my knowledge from using Vegas after along time. So rather than re-explaining it, people can look here or we can send them here. I use Pro 10 but it should be the same for the other versions too.
1. The first thing to do is to set your Project Settings to whatever best matches your camera. The easiest way to do this is to go to File-Properties and look to the top right corner of the box. There should be a little icon in the top right corner and when you hover over it it says, "Match Media Settings". When you click on this you can select one of your video files from your camera and it will automatically set all of your project properties to match the files from your camera. Also, don't forget to click "Start all new projects with these settings" so you don't have to do this every time.
2. After all of your editing, choose the "selection edit tool" that looks like a box in the top and highlight ALL of your video with NONE of your audio. Right click on one of the video clips and go to Switches-Disable Resample. Doing this will stop vegas from frame blending and allow your video to stay in the best quality!
3. When rendering you must use Sony AVC. I have tried all the other codecs and only the SONY AVC mp4 keeps the correct levels/color. Choose "custom" and then choose your desired bit rate, fps, and set your video render quality to BEST under "Project".
So those are the three main things! When I have some more time I will post some more tips!
Best of luck and post any questions!