I haven't had a chance to play with this over the weekend, but here's some answers to what you asked. First, thanks for informing me that I was recording at the non-compatible AVCHD compression, I would never have been able to figure that out because that name includes part of the letters from what that GSpot program said I used, but not all, and not necessarily in the same order written. LOL!! It all looks basically the same to me! I changed three different settings in my camera's settings - 1) the encode type, 2) the video clip type and 3) in the SD Recording tab, under Recording Type, for Video file format, I changed it from AVI to MP4.
And yes, I am getting full playback of video and audio (I assume so, anyway... I am seeing and hearing everything I did from the original clip.) I have no idea what the current set for "open with" is because I just double click it and it opens and plays in RealPlayer, since I have that set as my default player.
Ok, so far, I have 1) changed the "encode type" back to H.264 from MPEG4, 2) left the VIDEO CLIP TYPE file format at mp4. Hopefully this will give me the configuration you suggested.....
I just moved in front of the camera again to test and this is the GSpot picture with my new settings. It did upload to Premiere Elements, where I can see the video and hear the audio, but my icon is still just logo stuff, not the first video frame. I may just have to live with that.