There is an important difference.
A sequence's settings should be considered as the "export settings" for the sequence's preview files, and nothing more. The source video properties and export settings "override" any sequence settings.
In AE, a pre-comp gets rendered completely before its output is used in the parent comp. The footage in a nested sequence gets any effects applied before being rendered/previewed in the parent sequence, but all of the sequence settings are not always applied before the parent sequence sees the footage in the nested sequence.
For example, interlaced source footage in a nested progressive sequence will still be seen as interlaced by the parent sequence.
Yeah that makes complete sense (after a minutes of head scratching). That's what I was asking, thanks Jeff.
I wish they would strip Premiere of all transistions, FX, titles, opacity all that and make it a cut-only plug-in or 'mode' for After Effects. I mean I can almost do everything in Premiere but not really (adjustment layers would help).