Unfortunately, Full HD footage in MTS containers is impossible to play back on iOS. Not even the fastest AppStore players are capable of tolerable playback, let alone flawless. (XBMC can on JB'n devices, but only for non-interlaced videos.)
In addition, PlayerXtreme has a VERY bad h.264 decoder completely unable to render full HD MTS files with more than 0.2-0.3 fps. (See for example the video at http://movies.dpreview.com.s3.amazonaws.com/panasonic_dmcfz150/floatplanepassing.MTS ; linked from http://www.dpreview.com/reviews/panasonicdmcfz150/3 ). While, as has been stated, other players with the best H.264 software decoders (AVPlayerHD, ProPlayer etc.) can't play this file flawlessly either, at least the deliver around 10-15 fps - that is, almost two orders of magnitude better performance than PlayerXtreme.
I figured it out and it was very easy! My camcorder (Panny HC-V700) allows you to record in H.264 format in addition to AVCHD. Problem solved as the ipad with camera connection kit now recognizes these videos!