Not as familiar with FCE but it sounds like you are selecting 'Quicktime Conversion' under 'Export' to make your final output file for iDVD. That's the wrong choice, as it compresses the output file more than you need it to. You need to export a 'Quicktime Movie', which will be at the same resolution and settings as your sequence -- drop that file into iDVD and see how it looks. Then just burn a test DVD and make sure it plays OK on your TV.
JK
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SCQT! Self-contained QuickTime ? pass it on!