I usually have my "Capture Preset" preference set to DV NTSC 48 kHz when capturing SD footage from a mini-DV Camcorder, and footage captured from a DVD disk. I then make my edits on the footage with my "Sequence Preset" preference set to DV NTSC 48 kHz. Its been working fine with no problems and no viewer complaints.
Recently I read somewhere that editors would have better video quality if they set the "Capture Preset" preference to Apple ProRes 422 NTSC 48 kHz. Well, I tried this tip on a short 90 minute clip and I had to wait longer for rendering. Are there any real benefits to using Apple ProRes 422 NTSC presets? I can't see any differences in the output, but perhaps it my inability to see the differences.
In a nutshell, DV will never get any better than the original, however the graphics and text you add to the timeline will get severely degraded when compressed by the DV codec. So, you have several ways to deal the issue, but the best and easiest is to capture and edit DV as DV, then when you're completely done, just go to Sequence>>Settings and change the compressor to ProRes, then re-render the entire timeline. This will not improve your DV video quality, but it will substantially improve your text and graphics, leaving them essentially unscathed by DV compression.
See the post below for a further explanation if want more info...