Squashed preview pane in Pinnacle

I've just started trying to edit videos from my Canon 710 digicam using Pinnacle Studio 8 SE.

For some reason, the preview pane on the top right is only displaying the top half of each frame (the video is 640 by 480), but Pinnacle is stretching it downwards to fill the whole pane, making people look long and thin. It doesn't affect the final AVI file at the end fortunately, but it makes editing a real pain. I've gone through all the menus and the help in Pinnacle but I can't find any options to make it display the full pictures. Interestingly if I import 320x240 video, that displays fine.

I'm a complete newbie to all this, so I'd appreciate it someone can explain what I'm doing wrong. I'm using Windows XP, if that helps.