Could you recommend what to convert .mts to for FCP

I am cutting my first HD project, so apologies for my gaps in knowledge ahead of time...
I am cutting footage that was supplied to me as .mts files (native to the camera).  These were given to me on a drive, so I do not have the camera.  My question is what do you recommend I convert these file to for cutting in Final Cut Pro 7 (Final Cut Studio 3).
I am using iSkysoft Video Converter.  I can do it as .mp4, which makes for smaller files (about 4GB)...  I can also do ProRes 422, which makes large files (about 32 GB).  When I do a visual a/b look at these, there are very finite difference in the detail, but not enough to matter for this particular project.  Therefore, what do people recommend that will cut the best in FCP?
Also, when I import into FCP, do I still go with DV-NTSC for the main setting in FCP Easy Setup?  Or?  Eventually will be out-putting this for a friend that will burn onto a blu-ray.
Thank you in advance for helping bring me into the modern, Hi-Def world of editing!

ProRes 422. or ProRes LT if that option is available. It's about 2/3 the size of 422.  FCP does not work with MP4 files. It might APPEAR to, but issues will arise.
And no, you do NOT use DV/NTSC. That's an SD format, and you are working with HD. Just make a sequence, add a clip to that sequence and click YES when FCP asks if you want it to match the clip settings. 

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