rajah22,
The reason you are experiencing poor performance is, Adobe Premier supports native editing of AVCHD (which is very efficient format, but very demanding on the processor). A notebook is not ideal for this sort of work, nor is even a Quadcore Mac Pro.
I think the only reason other people are able to edit AVCHD without the same lag is because Apple's software (unlike Adobe) does not support native editing of AVCHD, the video is converted to ProRes, AIC or DV formats so Final Cut (and iMovie) can correctly handle them.
It takes a long time to convert AVCHD/H.264 to ProRes/AIC for editing, and on top of that, you'll have to convert it back to H.264 (for like like Apple TV and iPod) or mpeg2 for DVD. The Apple ProRes, AIC and DV takes up enormous amount of HDD space compared to AVC/H.264 (roughly file size ratio of 10:1).
The main disadvantage is, conversions always degrade the original picture quality because you are converting from one format (and colorspace) to another in a different container. The best method is to edit the source, as is (without conversion like Adobe Premier does), then export it to another format that you desire. This method is the quickest, least taxing on hard disk. However, as mentioned, you need a beefy system.
At this point, Windows is a better platform for native editing of AVCHD because more software supports it, even some very good freeware supports it. Plus you can use hardware acceleration from the videocard (or chipset if you have an AMD) to take some load off the CPU (OS X won't have this until, maybe Snow Leopard). Nevertheless, on a Mac Pro with a Quadro FX card, Premier CS4 is able to use GPU hardware acceleration to boost AVCHD/H.264 transcoding, if you have access to one.
On your Macbook, it is perhaps best to covert the AVCHD format to DV for less CPU intensive editing. However, the the problem with conversion is outlined above.