x264 seriously exaggerating camera shake

When I convert camcorder DV AVIs to MP4 using AviDemux, I'm getting really bad camera shake jerkiness. The output looks erratic and unpleasant to watch compared to the source AVI when watched on a TV.

BTW, the problem is just as bad whether I deinterlace or not (using Yadif).

Thanks for any tips!
Chris