This is my timeline workflow in Sony Vegas and it seems to work quite good:
1. Split and trim the clip you want to slow down
2. Right click on the clip and select "Create Subclip"
3. Make sure that Switches->Loop is enabled for the sub clip.
4. Drag out the clip so that you got 5 loops after each other
5. Drag the Twixtor FX to the clip and set the Speed % = 20
6. Render, I have just tested Sony AVC (mp4) and it works fine.
7. Enjoy your slow motion clip.
This example is for 20%, if you want 10% you need to create 10 loops of the clip, 5% = 20 loops and so on...
