Best workflow for converting HD footage for broadcast?

I've been banging around the forums for a while tonight looking for someone who's been down this road before, but to no avail. Here goes...
We shoot a weekly "Top 20" show using a Sony XDCAM EX-1 @ 1080p. It's a Top 20 video countdown show, which means that along with my footage (a DJ in a studio as your Top 20 host), I incorporate graphics and music videos ripped from DVD's. The final product from all of this winds up on a local cable channel, which broadcasts SD.
I use the Sony XDCAM Xfer software to convert the data from the SxS card to QT files. (So far, so good.) I open up FCP and place these files into my project. Once I drag one of these clips into my timeline, I'm asked by FCP if I want to change the sequence settings to match the clip I'm putting onto the timeline. I answer "No" (because I've preset the FCP sequence settings to 720x480, since the cable channel broadcasts in SD. Could this be where I'm screwing up?) I bring everything into the timeline (including the ripped videos) and get everything edited nice and tight. But wait...
I've been staring at my Mac monitor this whole time. When I play the project back and look at it using the broadcast monitor, well...it looks sorta sick. Certainly not what I would expect from HD-to-SD footage. Everything looks pixelated and sorta blurry. If it looks this way in the studio, you can imagine what it looks like when it airs on TV. It's not pleasing to the eye.
I would ask about what the best way is to deliver a show like this to a cable channel, but since the stuff on my broadcast monitor looks so crappy, the problem's gotta be home-grown. What am I leaving out?

If you know you are going SD why film in HD at all?
Its not like you are going to be re-airing your shows down the road in HD,
Most likely, the video's you are ripping from DVD are not HD either...
Depending on the deck you are exporting your show to, some of them have a down convert feature, mine does Sony HVR-M25U.
I have a weekly show I do, but I do it all in SD until the channels it broadcasts on will take HD footage.
Though if I am doing a commercial, I usually shoot it HD and leave it HD

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