1. Edit your video in its native HD interlaced 50i or 60i timeline
2. Be sure that all titles (if used) are placed on V tracks and not in T tracks, in fact I recommend to stop using T tracks for good.
3. When done editing the HD project, switch your project to SD and set resampling method to Lanczos 3
4. Use the built in Disk Burner to create a DVD direct from this new project setting. If the above project preset already exists as in my case, it is as simple as going to project settings and clicking the SD preset, done.
5. If using third party authoring tools like DVD Lab Pro or TAW5 or Encore, export to mpeg elementary streams
Or if you need an SD AVI, export to Grass Valley DV and select MSDV option, this will provide a DV AVI file that will play in all PC and Mac. When the export is done, switch your project setting back to HD
Note: If exporting to SD DV AVI, be sure you select to export in 16 bit otherwise an illegal DV AVI could be produced if your project is 24 bit
Note: The above methods gives better downscaling results than exporting HD timeline to HD Canopus HQ and then loading the HD HQ file in SD project