In My Own Understanding and FWIW
– You can input any original (nativ) media that FCPX can handle but as far as internal transcoding Apple knows that anything under ProRes422 , be it ProRes LT or proxy which are optimized for playback, will not however support lost less (multi generation) renders as required in many editing operation and then depending on input codec succeed to output a good faithful “Master File”…
In fact if you can pre transcode your material to these lower quality codec they will not degrade further if you choose the internal ProRes 422 transcoding, however if you need internal proxy generation from FCPX you will get “half size ProRes proxy clips”… which are meant for offline work but not for good quality output (Master).
i guess you can’t always get what you want because sometimes it’s not a good idea for FCPX to offer bad choices. If you are inputing very high quality sources the temporary proxy setting will be great for swift creative editing (old offline concept). This proxy setting will yield accurate xml for reconforming in finishing applications (Grading or VFX). You will be able to reconnect to any proper source media be it 4k DPX sequences …
ZAP