Below is a great post that I found which walks through Final Cut Express 4.0 and the fact that in reality, the software does not support true HD, rather it supports a maximum of 1440×1080.
The new AVCHD support in Apple's Final Cut Express (FCE) 4.0 makes the program seem like a good choice for use with today's AVCHD camcorders. All the newest AVCHD models (including the Sony HDR-SR11) record true 1920×1080 HD video. But despite Final Cut Express (FCE) 4.0 advertising support for AVCHD, there is an important limitation: FCE 4.0 only supports a maximum resolution of 1440×1080.
"Wait," you say. "I thought HD was filmed in wide screen, with an aspect ratio of 16:9 (1.7777). 1440/1080 has an aspect ratio of 4:3 (1.3333)!" Yes, that is correct, but 1440×1080 video is still widescreen HD! It's just anamorphic widescreen.
Anamorphic technology was developed to squeeze widescreen video into a traditional 4:3 frame without letter-boxing. When anamorphic widescreen video is recorded, the widescreen picture gets squished so it fits in the 4:3 frame. When the video gets played back, the player takes each pixel and stretches it laterally by 133%, resulting in rectangular pixels that fill up a 16:9 aspect ratio screen.
Regular Widescreen Image
Anamorphic Widescreen Image with Square Pixels
So yes, this is disappointing, but it's also understandable. AVCHD is new technology and FCE 4.0 is built upon very solid anamorphic foundations. HDV (High-Definition Mini-DV, the predecessor to AVCHD) and older professional HD formats including XDCAM HD, DVCPRO HD and HDCAM are all anamorphic by nature. Rebuilding FCE with native support for 1920×1080 was probably too substantial an undertaking for the 4.0 release; let's hope it's coming in the next version! The good news here is that when 1920×1080 support is added you won't have to transcode all of your video again; FCE 4.0 transcodes 1920×1080 AVCHD video at its native resolution.
You can always export a true 1920×1080 video from FCE 4.0 using Quicktime Conversion, but this video will have been interpolated from the FCE 1440×1080 rendered video. And interestingly enough iMovie '08 doesn't seem to have this limitation; there's no rendering required when working with 1920×1080 video. I can't confirm that the output from iMovie would be any better than what you get out of FCE.
The thing to take away from all of this is that anamorphic vs. non-anamorphic HD video editing isn't going to make a huge difference in the quality of the final product. Some people still prefer HDV to AVCHD in terms of video quality, despite the fact that HDV is anamorphic. A bigger concern is encoding the output, as a poorly encoded movie will dramatically decrease the quality compared to the source footage. In fact, to share our edited HD movies we often chose relatively low bit rates to decrease file size, and this choice instantly negates any discussion of anamorphic vs. non-anamorphic due to the amount of quality lost to compression.
Thank you Sean from SeanSense.com for allowing me to share with ReelSEO readers.