FCP does a lousy job of converting footage so most folks don't use it for that. It just has lousy scaling controls. You can get better controls in Compressor to make the conversion.
We have the AJA Kona boards here for this very reason. They do full broadcast quality up and down conversions so we can convert any format to whatever we are editing in, in real time In your case I would capture the SD material directly to DVCPro HD 1080 so it matches your timeline.
The bulk of our work is documentaries and news programming so we are constantly converting all sorts of formats for editing. If we receive the files digitally we'll even digitize from one machine to another. Can't recommend the Kona boards enough for this.
Walter Biscardi, Jr.
Editor, Colorist, Director, Writer, Consultant, Author, Chef. HD Post and Production Biscardi Creative Media