Colour curves is right, or it could also be a raised contrast and lowered brightness. The fade to the edge is done with a circular gradient or mask with a feather, that's how I'd do it in after effects.
I can't offer help for vegas specifically though. I think it's not as hot for full-on effects but a video editor can handle colour correction for sure.
I dunno why it rapes the quality though. Maybe it's a ram preview rather than a full render. Try it on 10 secs of video and export it and post it up.