it depends. How will you be using the output? How much of each media is there?
If DVD, then use a 720 sequence.
If it is just one shot of SD I would upscale it in AE and drop it in a 1080 timeline.
NOTE Output: The Final will be SD and put on a DVD.
If the HD is put on a 720 (SD) timeline... will it be automaticly down scaled or will I need to do something?
(I started shooting in SD because of the final output... then decided to shoot in HD because of the value of the subject matter and the fact this footage was hard to get and a one time ever shoot, and the raw footage could be reused many years from now when HD playback is a common standard.)
If it going to be DVD follow Peru Bob's advice.
It will only scale down automaticly if you set it in the Preferences.
Personally I would not do that.
I would set it to Set to Frame Size.
Select all clips in timeline and right click.
That way you can fiddle around with the composition if needed.
Use two sequences: 1080 and 720 and nest them in a 1080 sequence. Either scale the 720 or have a background such as the same media scaled up on a lower track, as many TV stations are now doing when showing iPhone video on their newscasts. Then export to mpeg2-DVD and let the DVD player upscale it. You can always export 1080 later if you want to do so.
You will have to manually scale down the 1080 if you put it in a 720 sequence.
Thanks Ann & Peru...
Good information. I'll try that.