Good luck editing HDV with those computer specs…it’s gonna be hard working on anything other than a G5 with at least 2gb ram…you might run into some problems. I personally would downconvert the whole project to SD. It will still look cleaner and crisper than the actual SD footage. Think of it this way: films are shot in 35mm even though 99% of the population don’t have projectors in their homes, because the quality of the image carries through in any format, and the same thing goes for HD.
It doesn’t matter what format you edit the project in, as long as you correctly burn the DVD it will play on all TVs. The only way to watch actual HD on a tv is to shoot in HD, edit in HD, burn an HD DVD in an HD DVD burner, and play the dvd in a HD DVD player on an HD tv.