Edit in original format, i.e. 1080i. I suppose your scans are of 2k resolution? You might need to perform some pan&scan further in edit process to combine 1,85(2,40) aspect footage from 16mm with 1,78 footage from HD. So far the best codec to use in FCP7 is ProRes. If you plan only to output for DVD, I suggest you stick with ProRes 422 HQ. Though, if some other options should’ve presented themselves in the future you can use ultimate weapon, namely ProRes 4444. It’ll suffice if you decide to go with film print medium.
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