Editing natively means your processors have to do all the work while you edit. The benefit: less work up front to import the media. Aside from that it’s mainly marketing. You’re still going to have to recompress to something when you output. The downside: less capability available to process other things like effects and multiple tracks of video and audio while you work. At some point native playback is a hinderance because smooth playback is lost and choosing edit points becomes unmanageable.
All the best,
Tom
Class on Demand DVDs “Complete Training for FCP7,” “Basic Training for FCS” and “Final Cut Express Made Easy”
Author: “Final Cut Pro 5 Editing Essentials” and “Final Cut Express 4 Editing Workshop”