I'm attaching a QT movie of a snowflake project we created in 2nd grade. When I uploaded it to Connect the images are pixelated and very blurry. It plays just fine for me and isn't a huge file size. I created the QT using the default setting in Pixie 3.
I think this might be happening because of how large the movie is. When it is uploaded to connect, it is converted and scaled smaller. Try exporting from Pixie using the "Web" option for a smaller version of your project. The idea is that when uploaded to connect, the video won't have to scale so much so there is less chance of distortion.