Playing M2TS files from AVCHD folders (BDMV and CERTIFICATE) can be achieved with some commercial software including Corel WinDVD 9 and CyberLink PowerDVD Ultra.
This is probably the safest method for playback, as these two software items are literally built for playing High-definition video content, particularly Blu-ray and AVCHD.
These software items are not free, they are both commercial solutions and are built to play movies from discs with compatible drives, therefore buying either item without a Blu-ray or HD DVD disc drive is probably a waste of money.
The other possible options below:
VLC Media Player could play back the content (as it supports H.264 video and AC3 audio directly without needing DirectShow filters), but it did run into some problems with several M2TS files.
Blu-ray players and the Sony PlayStation 3 (PS3) console support playing AVCHD files, and the at least the PS3 supports playing M2TS files directly without authoring to AVCHD first.
For an editor: Pinnacle does it well. They're using VC-1, support 5.1 audio and also have 60p profiles. You can create your own PRX file if you don't like the ones they have in there.
If you just want to transcode your files, there's a new option if you have right DShow codecs on your PC: Microsoft Expression Encoder 2 . They have a trial version.
To make it work, you'll need to have three filters:-
A TS splitter that supports AVCHD (Haali works, or use the one that comes with Sony's PMB)
A H.264 decoder (Sony's PMB uses half-res, but it's free; CoreAVC will work here too)
A AC-3 decoder (AC3Filter works)
If you're only looking for conversion, try this:
You can download a demo that does everything for a few days for free. When you add a .mts file to it, it'll say something like "format might not be supported", but it'll do the conversion anyway. I think it just doesn't recognize the extension, but it supports h.264/avchd.