Issues with Smooth Playback (Urgent)

So currently I'm creating a trailer for someone and it's is really laggy when I play it back, which obviously shouldn't be an issue, as smooth playback rendering is clearly an option. The issue is whenever I click it, for some reason the video drops heavily in quality and everything becomes fuzzy??

Does anyone know how to fix this? I've made sure my quality is set to full, Filmora is fully updated, (12.0.9) I've created render files from the Preferences menu and the button under the video preview, yet nothing seems to work and the resolution of my video still drops whenever I create render files, only for it to go back to normal quality when I delete them.

This is very urgent as I have to finish the trailer by January 1st, and it has to be in upmost quality. Please if you have an answer to this then reply, I don't know what to do.

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Edit: I'd also like to mention this issue was present when I was using Filmora X and 11, so downgrading wouldn't do anything.