[Ben Schramm]"1. The videos are sent to me as an .mp4 file, but they will not import to FCP7 without saying, "File Error: 1 file(s) recognized, 0 access denied, 1 unknown.""
FCP doesn't work with MP4 files. It really only works with files converted to editing codecs...such as ProRes. The full list of compatible codecs in found in the EASY SETUP list. For HD, ProRes is the best choice.
[Ben Schramm]"2. After I convert them to .mov, they import fine, but their aspect ratio becomes completely contorted and the smaller words appear very blurry. "
FCP was designed as a broadcast format editing system. Meaning, it was designed to work with broadcast formats and frame sizes...and also with formats from many camera types. So 720x480 on the standard def side (DV, DV50, ProRes NTSC codecs)...and then 1280x720 (or 960x720 anamorphic), 1920x1080 (or 1440x1080 anamorphic).
And broadcast frame rates. 23.98fps, 25fps, 29.97fps, 30fps, 50fps, 59.94fps.
It isn't designed to cut screen captures, which rarely are the frame size of broadcast formats, and rarely are the frame rate of broadcast formats. FCP really is not suited for the task at hand. Even if you convert to ProRes, unless you convert to a broadcast frame size, it won't really work. And if you did that, you'll distort the original screen grab.
You need to use other software...such as Adobe premiere Pro...or even Screenflow. Screenflow, which is screen capture software, also has a pretty neat editor as well. You can import the footage into that, and edit it, add text...all sorts of things. But it is pretty basic. If you want a larger set of tools, then you should look at Premiere Pro.
You'll be very hard pressed to edit this properly with FCP 7.
Thank you very much for your input. This is some great info to move forward with. I was worried that FCP7 was not my best solution, but it is currently the only program I have to work with. Just when you think you have a good grasp on the editing process, something comes along and throws you for a curve..