I just received and FCP project to export and compress for DVD purposes. However the another person originally cut the project in h264. I was thinking about converting the original footage to Pro-Res and the reconnecting it to the project for final export and compression hopefully for better workflow and image quality.
It certainly doesn't make things worse, but I guess it doesn't increase the image quality either. If something was shot H264 (I guess it is 5D footage) you will always have some shortcomings in the quality of the image.
Programms like 5D to RGB (http://rarevision.com/5dtorgb) produce a slightly better Pro-Res then the internal FCP re-encoding, but I don't think it will make a noticeable difference on the final DVD.
The DVD standard is ages old (from 1994 if I remember correctly), so even a H264 is a good master to encode from.
Was their project in FCP 7 or FCPX? Only FCPX claims to support h264 native editing.
If it was in FCP 7, I definitely recommend converting to prores and reconnecting. You cannot edit h264 in FCP 7 and if you risk it and do, you may have problems down the line with sync, corrupt files, frame accuracy, general errors, render issues, etc.
A good test for you would be to export a quicktime and see if the sync is correct throughout the video each time you play it.
I would recommend Compressor or MPEG Streamclip to transcode your footage. MPEG Streamclip wipes timecode clean, but this is 5D so there isn't any anyway.
Once you've exported the Prores sequence from FCP 7, you can create your DVD MPEG and audio files from that through Compressor as well.