Eureka! I have FINALLY managed to get HD edited footage on my TV (no thanks to Apple!).
This is how I did it:
1. Using Boot Camp, create a Windows 7 install
2. Install Cyberlink PowerDirector 10 Ultra (in Windows)
3. Import AVCHD footage either direct from HD camera or from an archive stored on an external drive
4. Edit, create titles, transitions, etc
5. Output (from a range of various options) using H.264 which will save the edited project as a .M2TS file which now plays seemlessly HD on a WD HD Media Player including Dolby Surround Sound.
It has taken a HUGE amount of research to finally end up with footage as good as the native MTS file the HD camera records in.
Good luck..... Spread the word!!!
As I understand it, that is possible, however, importing the H.264 (HD) edited footage into iMovie will render the same poor results and you will lose your HD resolution. Apple want home consumers (non-pro) to buy Final Cut Pro!!!