Two thoughts. Firstly don’t nest. Copy & paste the elements to the new sequence. The comments about text scaling in a nest may be an issue. Frankly I avoid nesting and there is no need for your application to nest. A non nested sequence should handle the text properly.
Secondly if you were viewing text on a progressive HD sequence (you didn’t say what the XDCam was), then the SD sequence, which is interlaced, will show the text badly on your computer screen. You can only judge interlaced text on an external monitor. Even if this isn’t the case, after looking at HD for weeks, SD looks shabby. Try generating a new text element and compare it to the ones from your original sequence. I bet they look the same. If not, then we would like to know.
I have been disappointed with FCP downscaling so now, I use my HDW 1800 HDCam to do it in realtime. Yes the graphics take a slight hit, but overall the pictures are better. I believe the Kona3 realtime downconvert is also excellent and of course a Terranex would be better.