Perhaps a typo? Scaling SD footage in an SD project will have noticeable artifacts at some point depending on percentage of scale. This holds true for any NLE. If you meant to type HD in an SD project where the extra resolution pixels can be used as an extraction, then FrameFlex in v7 is what you're looking for.
As said it's all down to the scaler.
If you bring SD into an HD project you are short of pixels so scaling up and you are having to make new pixels by interpolation.
However even in an SD project scaling up and you are loosing some pixels and having to create new ones from the ones left.
Either way you are pixel mangling and it's just how good your mangler is.
Frame Flex is useful in taking HD content into an SD project as it allows you to access less than the HD frame size so potentially still shrinking the size rather than previously where HD footage would be scaled to SD and then potentially scaled up.
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