FCP-DVDSP sequence PAL footage transcoding

hello,
I write asking of help in order to
(a) make a proper transcoding workflow and sequence to edit MPG footage with FCP
(b) output and convert for DVDSP.
I dont know FCP compression and settings so well, and i think i made some mistakes...
I use mac 10.5.8 Leopard on POWERpc with FCPStudio 7 (in the past i was using FCS5).
I need to shrink 2 videos 50min duration each (100min total), in order to fit on DVDSP.
I get a disc meter error my footage is 5.8 GB and exceeded space limit.
this is the 2/2 DVD (1rst is burned ok- it is alsmost full).
My files m2v are about 1.6GB each and inside DVDSP seem that
occupy 2.5GB each (rendered ?)ps for SD.
I recently received some mpg files from a sony hdd camcorder Dsr Sr58.
It has split scenes saved as MPG files which i transcoded to various formats
and tried to import them in a prores444 sequence in FCP to edit.
footage is handheld and has shaky parts too for most of the time.
this does not seem to be an HD camcorder, and i assume, despite the fact
it has a 1:9 LCD records 4:3 and 16:9 anamorphic. I have attached an image
of the folder names i get when i plug the camera via usb on my mac.
I cannot also understand, what is the frame rate recorded by this camera.
i believe it is INTERLACED 25fps. I see evident lines on my mac @ playback.
I need to burn PAL SD DVD (50fps) at the end.
When i open a file in MPEG streamclip, shows 1024x576 frame size unscaled.
However, when i open it in QT shows 720x404.
I firstly used MPEG streamclip and exported to QT making 2 versions
(a) Photo JPG compressor codec @ 80 quality
(b) Prores444 @ 70 Quality.
I did not Deinterlaced in the transcoding stage at all.
I then opened (a) in FCP and i saw i needed to render all clips inc audio
I exported to mov but files are huge and when i make m2v files are 2GB each.
i tried (b) and saw i needed to render the clips again. The m2v files are about 2.2GB each
and there is NO way to bring the quality slider down in FC sequence settings. Seems locked to 100%.
So... I abandoned temporarily and ask for any help here.
Can anyone suggest me a procedure, on
(a) Make a proper project sequence that wont need
render the files each time i import them from transcoding
(b) Suggest how to use compressor and the variable bit rate setting to decrease size further ?
thanks

hm... thanks for sugesting JES. it seems when i feed this movie file in JES and choose deinterlace, the program crashes when file gets about 100%.
yesterday i tried to burn the interlaced footage on DVDsp deleting clip1 to be able to burn it.
I made the m2v file using compressor and set BIT RATE to 3,7mbps average. max rate=6.4mbps
Motion estimation= good, and mode= one pass vbr best. i imported them in DVDSP...
burn was ok. i played the dvd on 2 different dvd players (no pc/mac), on PAL TV.
the first played image ok. i mean stady shots appeared clean with tiny interlaced lines sometimes.
The shots that had camera shake and fast PAN (amateur video) showed flickering on TV and during pan
they were leaving a semi-transparent trail behind peope. like a ghost shadow.
The second one, played a more smooth version of steady images without showing the interlaced lines. however, same shadows appeared when fast pan occured, with slow prosumer camera speeds i believe.
JES does not work for a reason on PPC DC 2ghz or i make wrong settings....
I tried deinterlacing (progressive) with MPEGstreamclip, and worked ok. the
Now, my question is.... if i make m2v files again, same bit rate, burn in DVDSP, will the dvd player, play them ok on PAL tv (which uses interlaced lines to display the image) ?

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