Canvas on Final Cut Express is in letter box and downgrades clip quality

Hi, I'm a n00b to FCE 4, but I've been having this issue for about two weeks now where, my canvas is stuck in a letterbox format and my viewer isn't; it's in 4:3.
I would be ok with my canvas in this format but, my clips' quality are downgraded and look quite terrible, even when i export it in 1920x1080.
And now, my audio is not synced with the clips either.
I've tried adjusting my sequence settings according to my camera, doing easy set up, gone to the apple store for help, reading forum, uninstalling and re-installing, etc.


I'm at a total loss and really do not want to edit on imovie.


This started occurring suddenly when my external harddrive was ejected, if that helps.


Thank you!