What is the encoding, res, bitrate of the source file? What is the bitrate of your current stream? You should be able to figure this out with a monitoring tool, such as Windows Resource Monitor.
It seems to me you're encoding 3-4 times. Each re-encoding may degrade the quality. You'll get the best quality if you can play the VOD file directly with Wowza.
If the source files are not compatible with Wowza, I suggest using an offline encoder such as MS Expression or FFMPEG, to do a quality 2-pass encoding, then stream the VOD files straight from Wowza.
You'll get better quality video (less blocking) if you encode at a lower resolution, then let the client device upscale to a higher resolution. The greatest thing affecting quality is to have a quality camera doing the initial capture. A 360p 500kbit/s stream shot with a quality DSLR looks better than 1920/1080 at any bitrate shot with my webcam.