Why is video quality reduced when i add to timeline?

so i just started using final cut express and i have got MPEG streamclip, now im using footage from my kodak zi8 that shoots 720p at 60fps. i converted it in streamclip to a quicktime file in apple intermidiate codec, i set it to 60fps and 720p and 100% image quality, now i can edit it just fine but when i look at the preview it looks fine but when i drag the clip down into the timeline it loses image quality and becomes more pixelated. please tell me how to fix this ill attach a picture to show you what i mean

Is the FCE Sequence matching your imported Clips?
Right click the Sequence icon in the Browser and select Item Properties.
Al

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