Hi all,
I made the upgrade from prel 4 to prel 8 and I'm also noticing a huge difference in the quality of the video playback on the preview monitor. I have also set the external device setting to "none" but no noticeable change in quality. This is prel 8 running on a brand new hp pavilion Core2 Quad/Windows 7 64 bit with 8GB of memory (so there should be plenty of resources). I updated the video card driver (which practically cured the constant prel 8 crashes).
The quality of the final product on DVD is good though, but previews are just awful!