Eric,
I hear you on this confusion. It actually happens a lot to people, and you’d see that too if you did a search on the word “blurry”. What is going on here? In the Viewer, you are seeing the LT animation in the Animation Codec, which is lossless. Once you place it into the timeline, it becomes a totally new beastie. It’s now in the DV-NTSC codec and compressed 5:1. Adding to this confusion is a little thing called RT Extreme, which is something you absolutely need to get your head wrapped around. RT Extreme allows you to preview more layers with effects on them to playback. Next on the list: the dizzying array of options to render your animation into the timeline’s codec. You have to make sure the correct options are checked off. Topping off this confusion is that I am guessing that you are not using a video monitor as you work. If you are judging your graphics and rendered fx on the Canvas only, well, you cannot see the true rendered quality of your fx. IOW, you don’t have a “functional FCP workstation”. You see, FCP is more than another computer app, it’s a system–you have to work with FCP set up properly to have a predictable and reliable experience while you’re editing. Rather than giving you a quick fix, it’s better that you understand what is actually going on here:
First read this so you can understand how rendering works, you’ll need to know the difference between Safe RT and Unlimited RT and have the right properties checked off when you render your LT animation into the Sequence:
https://www.kenstone.net/fcp_homepage/rendering_rt_fcp_4_balis.html
What should you learn from that article?