MP4 format created from either Main Concept or Sony AVC/MVC should look really nice.
Preserving the quality is a function of how closely you match the properties of the source video. Keep the size (e.g. 1920 x 1080) the same, and then the higher the bitrate, the better it will look. In the render template if there is a place to set minimum bitrate, make it at least half the maximum. The higher you set the minimum, average. and maxiumu bitrates, the better.
Rendering levels in Vegas for proper playback are 100% dependent on the output format. AVI can have either RGB or YUV output format. Use MediaInfo to let us know which, and someone will patiently explain the apparent discrepancy between the preview and the output in Vegas.
The excellent suggestion to use mp4/avc requires the appropriate output levels filter, depending on your source levels, which I assume are RGB. Use the histogram to find out.