What video formats does Final Cut Express support?

I have Final Cut Express HD 3.5. What video formats are compatible with this program? Also, what frame rate and aspect ratio do my videos have to be in for Express to accept the video file?

Good of you to have read the manual. It helps us answer the question now that you've included that information.
Your material must be converted to either DV, HDV or AIC (FCE Native formats). As you have discovered, while FCE will accept a number of non-standard or native formats, it will not play happily with them.
DV and HDV are anamorphic formats. That is, they use non-square pixels. Standard DV is 720x480 (a 3:2 ratio) that FCE will do the conversion magic and have is display in a 4:3 format. Widescreen DV (aka 16:9) is ALSO 720x480 but the narrow dimension of the pixel is oriented the other way. When you tell FCE that the file is 16:9 anamorphic, it will do the magic and display the material properly. If you do not, it will display as though it is standard definition 4:3 and the people will be much skinnier but not taller.
HDV is 1440x720 but displays in 16:9.
AIC can be 1280x720 or 1980x1080.
All other dimensions are not supported and you may have very unreliable results when using them. This very limited abiltiy to deal with more than a couple of formats was one of the main differentiation points between Express and Final Cut Pro. There were a great number of other differences but this was one of the biggest limitations for most consumer level users.
If you want to edit a lot of non-standard,  non-native formats, look into Final Cut Pro X or Adobe Premiere Pro. Premiere Pro is within the editing paradigm of Final Cut Pro/Express. Final Cut Pro X has gone in a different direction which involves a new learning curve. Don't be fooled by the name, it is a very different animal than Express.
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