Sequence settings need to match clip settings exactly. The only thing that can be set differently is the compressor (a lot of people set it to ProRes) but then you have to do a lot more rendering.
You should really look at bring in the HDV as ProRes (down side is files are a lot bigger) much easier to handle this type of footage, everything speeds up, renders and exports and holds up better with graphics and color correcting.
are there any other down sides to bringing in the hdv as pro-res... the increase in file size doesn't bother me so much... i'm more concerned with getting the best picture quality possible... especially when i have to burn it to dvd or print it to mini-dv...
To print out to Mini DV (SD) your timeline will need to be DV unless you have a capture card and your deck is attached to that verses firewire.
You maintain better quality throughout the editing process if you go to ProRes, less generational lose, graphics will be sharper and so on. It also will be quicker to encode, render when needed, exported, or anything else you want to do.