Hi - thanks for letting us know that you've resolved the quality problem, and sorry that none of us got back to you earlier. But just for the benefit of other users, are you able to share the method you used originally, compared to the method that worked for you? It may give us a better understanding of why some methods work better than others.
I get very good results importing 1080i AVCHD clips at either the Large size (960 x 540) or Full (1920 x 1080), then exporting using Share > Media Browser or Share > Export Movie, at the Large, HD 720p or HD 1080p size (subject to the import size).
iMovie '11 is actually version 9, the latest update being 9.0.8. As you appear to be on iMovie '11 version 9.0.4 it would be worth updating - unless of course Snow Leopard doesn't work with versions later than 9.0.4 (your profile shows you are using Mac OS X 10.6.8). Note that iMovie '09 is version 8, the last update being 8.0.6 - all very confusing!
Thanks, John. In addition to the standard export methods you mentioned, I learned (from watching a iMovie tutorial on Youtube) that a third option is to select "Export Using Quicktime" and then there will be an Options button to click on which in turn provides a wide range of more advanced movie adjustment settings to click on (including video sharpness) as well as a wide range of export quality settings. So I am really pleased to learn it's possible to produce movies with iMovie that have good clarity and colors when viewed on Youtube or Vimeo.