Hi
Normally photos added to a video i.e interspersed with film clips look pretty much as they do when viewed on your PC alone. The appearance of images in the preview window on the right may be very slightly inferior (or when viewed in full sceen on using the Preview tab on the tool bar they can appear quite pixellated), however I am not quite sure what you mean by faded exactly. Is this in a finished film (avi etc) before saving as a DVD or in the completed DVD?
What format images are you using and how are you adding them to your movie?
Nat