I think every ones level of what is an acceptably level of video quality is different. The project I was working on was an HD Movie that had a small amount of SD footage in it. That is why we went through the big hassle of getting the maximum quality we could out of the SD footage. For your project I personally think you will be just fine working with your SD footage in a HD timeline. I recommend that you do a test and judge for yourself if the quality level is acceptable. Hope this helps.
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