Jerry is right, you lose a lot of resolution.
Just had to make a SD DVD of a HD Project.
But there is ways to make it less bad: Export the project in HD Quality from FCP, then put it into AE resizing it there to SD, before putting it into encoding for compressor. If you do not have AE, then do it in compressor, but make sure resizing filter is switched on and set to best (will render ages though).
In general, it still sounds like you have a Field issue.
In that case, if you want to have it in Progressive, you have to throw a de-Interlacing Filter on you material.
Best would be Frames Plus from RedGiant.
Sascha