SD Video Workflow with FCP

I have captured a lot of SD Videos from my camcorder with Premiere Pro 2 long long time ago but didn't have the time to work on them.  I have exported them in AVI format and saved them on the Windows Home Server for years.

It is time to do something about it.

• I copied the avi files to my MacBook Pro external hard disk.  Import them into FCP 6.5.
• View the videos one by one to add the log notes about each clip
• Create a sequence for an event and drop the related clips in the sequence and edit the sequence, if needed
• Export the sequence to QuickTime movie (it is hugh, for a 14-minute video, it is 3.18 GB)
• Use Freemake Video Converter to convert it to MP4 video (and the result is pretty good and it is about 200MB from the 3GB one)

Issues:

• When I imported the AVI files into FCP, I got a warning saying these files are not optimized to FCP.  (I should convert all the clips to Apple ProRes 422 if I am going to do a lot of editing)
• I tried to export the video directly from FCP to Compressor with different format but the results are NOT good.

Questions:

• What is the setting I should use in Compressor?
• Apple, Format, QuickTime, QuickTime H.264, Key Frames Automatic
• Should I do anything before I import the clips into FCP?