Is it always the case that when I add a photo to the sequence in FCP it loses quality.
Looking at my screen now, the quality of the photo in the viewer is excellent, but in the canvas its not nearly as sharp.
#50 - Quality difference between Viewer and Canvas
Shane's Stock Answer #49 - Why is the quality different between what I see in the Viewer and what I see in the Canvas?
Well... the viewer is just that-- a viewer. It will display anything that fcp will recognize as usable video or graphics. The canvas is a viewer too, but at the pixel dimension specified by the settings of your project and sequence.
For example, if your graphic or footage is much higher resolution than your 720x480 DV sequence, FCP is interpolating down your file to fit the settings of the sequence. Usually this makes it look not so hot. DV is a 5:1 compression working with a 4:1:1 color depth. Your pristine picture images and graphics are being crushed.
Same with picture files. HIgh res pics now adopt the sequence settings and will render to those specs, and most likely they are not as high quality.