You didn't say that you were playing Windows media files using the Flip4Mac codec. To edit those, you also need the paid version of Flip4Mac. As for the blurriness, that is probably due to the fact that your Mac display is sharper which makes the inherent blurriness of your video stand out.Not only that, the quality of reproduction in Quicktime is crap compared with that in Windows Media Player. ...
There was no need to transcode the video. If you do, then be aware that Flip4Mac does not have full functionality until you pay the optional fee.... Then I converted it to a .mov file with QT Pro and the quality went to hell.