Scaling the iPhone 4 footage from 720 up to 1080 isn't ideal, but that's not your big problem, the aliasing is because the iPhone footage is progressive segmented frames, i.e. two identical fields that comprise a frame, which you have put into an interlaced timeline.
You need to transcode the iPhoine h.264 material to proRes anyway, as h.264 isn't really editable. Do that in Compressor, change the ProRes preset to force interlaced frames, and turn on frame controls and change Output Fields to Top First. See how that works and report back...
David Roth Weiss
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A forum host of Creative COW's Business & Marketing and Apple Final Cut Pro forums. Formerly host of the Apple Final Cut Basics, Indie Film & Documentary, and Film History & Appreciations forums.