After your post I looked at it. It looks like it would have a lot of advantages over Photoshop working with video. I will look into it more.
As to the origional problem, I think I figured it out. I think it is the mjpeg codex. I will have to change it to a lossless format. Does anyone have any advice of how to change it, to a lossless codex which Adobe products will work well with?