Loss of quality in drop zone video

I am creating a DVD project where I've created a drop zone that is approximately half the size of the screen, split vertically (446 x 480 pixels). I have a video asset I wish to use in this drop zone, but no matter how I export the video (from Motion), it loses quality in the drop zone. It is not a matter of bad compression settings. It almost appears as if the footage has been scaled up from a smaller image.
Is there a limit to the resolution of a drop zone? If I scale down the image, the video looks crisp again... of course then my original layout is no longer intact.
Any idea of a workaround for this? Hopefully I am not missing something obvious.
thanks,
ak

You really don't have to use drop zones at all, just make everything part of the background. you might have to combine your motion workflow with some editing in FCP. I would suggest not using Uncompressed Animation, but simply using the DV-NTSC project preset.
You have the option to either import the .motn file directly into DVDSP, exporting your motion project as a quicktime movie, or a quick edit in FCP and export as a quicktime movie. I would suggest whichever route you take, export it as a quicktime movie and use compressor to encode to MPEG2 before importing your asset into DVDSP. This will give your greater flexibilty and control on the quailty of your final video.

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