I'm not sure if you want to stay in HD PAL or if you want to down convert to a standard definition version of your PAL project. If you're making an SD version then might I suggest you use the Pro Res codec instead of 10 bit Uncompressed. Pro Res will look just fine and the file sizes will be a lot smaller compared to 10 bit Uncompressed. Pro Res is also far easier on your system to play back as well.
You say the picture is blurry. Are you looking at the unrendered playback, and if so, does the picture sharpen up and look fine when the play head is stopped? If it is, then Final Cut Pro is trying to give you smooth playback performance and is dropping the quality setting instead of dropping frames. Once you render your sequence final Cut Pro should play back your timeline at full quality.