My newly purchased camera records in MPEG-2 Transport Stream. (or filename .MTS, or as my camera says in the menu: AVCHD). When I try to open it in Final Cut Express (by right clicking the file and "open with" since opening it from FCE doesn't work since the .MTS files is grayed out and unable to be opened) I get the message: "File error: Wrong type".

So does this mean that I cannot amend, resize or do anything with these types of files in Final Cut Express?

My alternative recording file type is MP4 but that is in much lower quality.

Any tips? And if FCE does not support this file type, will I have the same problem with Final Cut Pro?

Using version 4.0.1