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>First, am I correct in my assumption that it is best to render all of my assets into an editing format before putting them in my timeline?
Not necessarily. It improves things for some folks at the expense of the conversion time, but for others it is not required. I'd expect that your i7 can handle the native H.264 stuff. It'll definitely handle the HDV MPEG2 from the HC1.
>Second, what is the preferred editing format that will give me an optimal experience in Premiere?
In almost all cases, you should set up a sequence that matches the source footage that you have. In this case, you'd need 2 sequences to start with. One for cutting the H.264 stuff and one for cutting the HDV footage.
However, if you will intermix the two formats so that the program flows from one to the other at times, instead of playing all the cut footage of one format and then playing all the cut footage of the other format, then you will need an "assembly" sequence where you will do the cutting of both formats.
The format/settings for the assembly sequence should probably match the lowest resolution footage that you have. In this case, that's (most likely) the HDV stuff. My thinking is that downscaling the HD footage is better than upscaling the HDV footage, especially since you will need to downscale yet again for export to DVD and the web.
For export, I'd create individual sequences for your destination formats. In the example you gave, you'd need a standard-definition DVD-sized sequence for export to DVD, and another sequence that is set up to match how you want to export for the web. You can add the editing sequences or the assembly sequence to as many other sequences as you want (it's called "nesting").
Pr CS4.01 has a new feature in the Sequence Settings called "Maximum Quality Rendering". It takes a long time to render using that setting, but for downscaling from HD to SD it is mandatory if you want to maintain any kind of decent quality in the finished product. Make sure that setting is checked at least in the export sequences, but you may want to select it in the editing/assembly sequences just to be sure. Once the sequence(s) have been sent to the AME, be sure to verify that Max Quality Rendering is set there, too. It should be set by default but it's a good idea to double-check. Use the flyout menu for the Video tab in the AME to find the setting.
That's what I'd do, but others may have better or more efficient ideas.