dpriest,
If your FINAL product is going to DVD and you want to create a HQ project and your digital footage is not HD I'd probably suggest the following approach. Keep in mind, every format that uses a codec has loss. Raw digital format is rather large but gives you more flexibility on how to produce latter to match you final project format. However, you would always have to render.
1) Use PD7 to capture the footage from your camera. Use the MPEG-2 Video, DVD-HQ profile. This captures at the bitrate discussed early for DVD HQ.
2) Import file into PD7 and play as you wish
3) PD7 has what they call SVRT. (read the docs or other posts here) Go to SVRT by Dir Chair > View > SVRT Information. Remember to set the profile there again to MPEG-2 DVD HQ. You will see that the video footage does not need to be rendered, I.e. you captured at HQ and your project is HQ so file processing will be minimized. Only the areas that you added features need to rendered.
4) If you change the SVRT profile to DVD SP you will see everything needs to be rendered. Captured at HQ bitrates but creating at SP bitrates.
To create a new profile in produce, go to Produce > Create a File > Next > select MPEG2 > select of default profile in the "Profile name/Quality box or to define your own hit the new icon, left most icon near the bottom of the window and define as desired.
Similar setup as above during capture. Go to Capture > profile button over on the right side near bottom of window and adjust to your desire.
Play around some, most of the menus are rather straight forward.
Jeff