Do you have a deck at your disposal? We use a PDW-F70 deck, and I’ve found that that gives a better looking down-conversion than what our Kona 3 card does (We also downconvert out of the deck rather than using the Kona for our digitizing right now while we’re still cutting SD. It just looks better) We plan to lay back our Hi Def masters to XD Cam, then use that to dub down to digibeta.
If that won’t work for you, you should leave your timeline and your output in Final Cut set to the HD format that you’re working in, and the Format in the Kona Control Panel should be set up the same. Set your secondary format to 525i29.97, and set how you want it to downconvert (crap, anamorphic or letterbox). Set the output to use the secondary format, and then output as normal from Final Cut, and it should come through just fine.
If that isn’t working, you’ll have to either wait for someone with a little more experience explaining the process comes along, or else do a quick search of the COW, as I believe this has been discussed quite a few times before.