I am trying to create a HD video in Final Cut Pro 7 with only a photo, audio, and text through the entire video.
I am stuck trying to figure out the proper sequence and export settings to have the photo appear high res and not distorted when I export the movie.
Its really a case of "how to format stills for HD video"
Since you want your final output to be HD then you need to make a sequence that is 1920x1080 29.97 or 25 depending on your TV standard.
(Perhaps use an HD ProRes LT easy setup)
Your stills dont need to use those exact dimensions as you can use larger stills and then apply some moves without quality loss.
However dont use stills that are larger than 4000 pixels in any dimension or you will run into the "out of menory" issue.
(If your stills are less than 1920x1080 then you will see quality loss.)