The easiest and best way I know to do this is with Episode. It has presets for converting an NTSC movie to a PAL M2v for authoring. A couple months back I used it on a 720p project and made a DVD in PAL format for a show in Italy. It worked perfect. There are some cropping issues but pretty simple.
That blurred look CAN be the result of FCP rendering at lower quality so it can play it in real time, you must judge the results on a bona-fide monitor or at least a TV.
This is not a qualified place to ask for legal advice. You may be safe under some kind of parody law, but my rule of thumb is, if it makes you instantly think of the original, you’ve crossed the line. Go see a lawyer.
M100 is not going to be able to help you with an FCP issue. As Walter said, there is an AJA control panel, it is a little app, located in your applications folder.
Steve,
You can work in DV, but just before you output, go into sequence settings and change the compressor to 8 bit uncompressed or ProRes. You’ll have to render again but your graphics will improve.