I recently found that you can get decent results by creating a standard definition sequence, dragging your high def sequence in, then scaling it down (Effect Controls -> Motion -> Scale).
As far as I know you can’t just tell it to scale to a certain width and height, you have to mess with percentages.
At any rate, this seems to yield a much crisper result when subsequently opened in Encore than exporting a DVD based on a high definition timeline.
I haven’t done extensive testing yet, so please feel free to set me straight if I’m out to lunch.