I go straight from the FCP timeline using export to Compressor and select a preset like 90 minutes SD DVD. This converts from the HDV timeline straight to the SD mpeg2 file for DVD Studio Pro.
Using the QT conversion to ProRes simply transcodes the footage and it still needs to be downconverted to SD mepg2 for the DVD, so you gain nothing by this extra step. In fact you lose both time and quality, although you are unlikely to notice the quality difference as ProRes is good.
Yes, you should stay interlaced and no, it has nothing to do with 50i if you are making a PAL DVD. Remember all 25 frame codecs are upper field except for DV codec which you should avoid like the plauge.