Seems to me that this clip is a widescreen SD movie file. If you bring this clip into your standard MPEG2 compressor, or just bring it into your authoring app it should recognize it as a widescreen clip. You would specify that you want the track to be widescreen and it should look and play like a widescreen clip.
I think I have left an important part out...this clip has to be edited with SD 60i footage. When you pull this clip into a 720x480 project it has to be rendered, shrunk, or it's stretched...whenever I try any of these 3 methods...I always come away with a fuzzy 720x480 clip. Right size...poor quality...and that;s essentially the issue.
How do I reduce the size of the clip while maintaining a similar quality as the uncompressed .mov....this is the question.