First trials with Kdenlive.
I'm trying to render a test file that is Clip properties says is using video codec Window Media Video 9; Frame size 640x40; Frame rate 1000; Pixel aspect ratio 1.00

No matter what format I try to render in I keep getting heavy pixelation. The test clip is very clear.

Can someone advise.

There was a bug a couple of versions ago that resembles your description. What are your versions of MLT and Kdenlive?