I can’t tell from your description, but it sounds as if the application is behaving correctly. There is a very limited capture window for HDV material in FCE. There is no machine control. The deck has to be controlled manually. You press the Now button when the deck is rolling. Capture is not real-time has the file is being converted to AIC, but capture/conversion continues after playback stops. It’s described more fully in he help menu.
All the best,
Tom
Author: “Final Cut Pro 5 Editing Essentials” and “Final Cut Express 2 Editing Workshop” Class on Demand “Complete Training for FCP5” and “Final Cut Express Made Easy” DVDs