We know where the problem is now. The project settings are catastrophically messed up. The 1080p input video is being scaled down to the timeline’s 1280x528 resolution, then the 528p is being scaled back up to 1080p at the time of export using bilinear interpolation, which of course is meant to be fast rather than look good. Also, the colorspace of the timeline is BT.601 instead of BT.709, so all of the colors will be shifted into the duller-looking SD gamut as well. It’s a total disaster.
There is not an easy fix. Generally speaking, it is best to set the Settings > Video Mode to an actual value rather than leave it on Automatic so that the timeline will be the resolution you want regardless of what media you drop onto the timeline first. In Automatic mode, the timeline takes the format of whatever video you drop on first, which may not be representative of your entire project. This is probably why the timeline has the settings it currently has. It wasn’t anything you did wrong specifically.
If you are handy with a text editor (such as Notepad++), open the .MLT file and change the third line (it starts with
<profile) such that
colorspace="709". Note that if you had any filters or keyframes that depended on pixel positioning such as text or Size and Position, then those coordinates will not be scaled to the dimensions of the new timeline and this fix won’t work. Do Fix #2 instead.
Create a brand new project with the Video Mode set to the output format you want from the start. Then rebuild your project from scratch. Yeah, pretty awful.
Regardless of how you fix the timeline, recommendations for the export settings would be Video > Interpolation > Bicubic and Codec > Quality > 68% to 80% depending on taste. Quality at 100% is much slower and a much bigger file for no visually perceptible gain.