There will always be a quality loss, limiting the amount is the main concern. Remember DV is 13 GB per hour and you put as much as 2 hours on a DVD at 4.7 GB,
Things that really kill m2v encodes are a lot of noise and bright reds especially when coming from DV footage.
The first thing to try with the resources you have is to export to compressor from the FCP timeline and try a CBR encode with bitrates above 6 Mbps, make sure you encode the audio as ac3 to give you more space for the video.
Then if still not happy try BitVice then if still not happy there are the 2K plus software encoders or hardware encoders.