Do you have an Insignia video camera?
I have a NS-DV1080P 5 Megapixel and even though its high definition the picture is incredibly grainy, even in HD mode. I think I got ripped off.
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We get what we pay for. When it comes to cameras (Optics) you really can't go cheap. Sometimes you can get by for a while with electronics but you find out immediately with cameras. Take it back and get a Canon or Sony.