Jeremy,
The “regular ugly DV stuff” ain’t gonna ever look any better than it is, no matter what you do to it. This workflow works fine, except that 10 bit is way overkill 99% of the time, your graphics will look just fine in 8 bit.
What I always do in this situation is just open up the sequence settings and change the compressor or easy setup to 8 bit, render and off you go. You’ll need a video card or an iO to see the program play over a monitor, but if you’re going to QT or mpeg2 for a DVD you’re good to go.
You can try nesting in an 8 bit sequence if you want, but I always just keep this simple. I usually don’t save the changes, as it’s faster and easier to make any future changes in DV.
HTH…