[Abby311]

Hey,
I’ve been having a similar problem with loss of quality on Final Cut 6. I was using green screen, and every time I readjusted my subjets’ sizes, their faces became blurry and lost quality. I think I’ve found the solution, though. If you double click on the clip so that the viewer for that clip is active, go to the motions tab at the top of that window. Below basic motion and crop is distort. If you click on the drop down arrow, the last option in that menu is aspect ratio. If you make sure the aspect ratio is zero, hopefully that will improve the clarity of your image.
Also, with regard to jagged edges, I used color smoother under the video filters tab. Just make sure that if you are using any other filters, the color smoother is the first filter in the last.

Hope that helps. Best of luck!