The best workflow for SD DVD-Video output would be to down-sample the HD footage first and use that in an SD Project. Everything would setup as SD.
Dan Isaacs has a down-sampling workflow that he's very happy with. I'll see if I can find the link to it.
CS4 does allow one to mix Assets better than does CS3, but that would mean a total upgrade, and is not likely to be the best route here.
I'm sure they have CS4 and theres a reason they dont use it, something to do with their hardware.
Thanks for the reply!!