If no frame is displayed in third screen, you must have some trouble with video codec. To find a solution, please read My LivePano does not play properly
topic in Panotour 2.0 FAQ here: http://www.autopano.net/wiki-en/action/view/Panotour_Pro_2_-_FAQ#LivePano
About rendered video size, LivePano uses planar projection with your input video, most of the times shot through a fisheye lens. Once projected, you are asked to crop to the useful area (screen 3). LivePano will render a video which size depends on the amount of pixels kept in the video. There is no quality reduction in the process.