I have noticed the same behaviour myself. I'm not sure if this is a problem with only Videopad or the MTS files in general, it is not a good format for editing. I now convert the MTS files to either Huffyuv Avi (lossless compression, but huge file size) or high bitrate MPEG4 (Xvid) and edit those files. I also noticed that I had sluggish performance when using MTS files and it would take over 10 sec when I tried to reverse 1 frame. Anyway, with Huffyuv or MPEG4, everything works well, including transitions.