To reduce your rendering needs, try to work in the format which best matches the majority of your footage. That said, you'll almost certainly want to make sure that your choose working format is an native FCP one ... and that you turn on "Unlimited RT" in your timeline RT menu (button at top left of timeline).
The proper timeline is simple. What format do they want? HD? SD? 24p? 29.97? If they don't care then it's a judgement call on your part. But if you're using HD footage, I'd work in HD, even if the majority is SD. Unless specifically you know that you will never need an HD output. Clients often ask for an HD copy or a widescreen copy after a SD project is finished.
If all you care about is rendering, then work in a timeline that matches the majority of your footage. But it needs to be a format supported by FCPs RT presets. For example if your footage is h264, or other distribution formats then you'll need to convert those to an editing codec like ProRes first.