I use the exact same camera, but FCP 6, not sure what version you are using. Anyway, the camera cab be a little weird I guess. siny has this feature called iLink. iLink basically for the camera to convert HDV into DV, without you having to do it. So, if you are in HDV mode and iLink turned on, you are saying that you want your HDV footage to be converted into DV footage, so FCP will look for a D signal, not HDV.
I’ve had this problem many times.
So, make sure your camera is in HDV mode for the VCR, and make sure iLink is turned off.
For getting a good picture, I’m not sure yet. I’m still playing around with settings on capturing and getting the getting the best image possible.