Some one I work for was looking at macs/fcp because he shoots in 35mm and wants to transfer to high def, inport in quicktime fcp/ntsc then back to high def. with out lossing any thing. He thinks mac/quicktime/fcp is the only setup that will handle it. I said I would ask the kind folks at the SF forum if VV3 would do the same thing since he has a PC, and the cost to go mac/fcp, well you know.
I don't think it is possible with VV3 with respect to HD content. VV3 won't read my HD content and MainConcept MPEG-2 encoder in VV3 can only output MPEG-2 system stream while HD output is a MPEG-2 transport stream requires HL@MP.
Your friend might want to try TMPEnc encoder (freeware), which might be able to convert the HD content to DVD, SVSD, and VCD stream.
Pop over to the Creative Cow Vegas Forum and do a search on HD Downconverting - Both Douglas Spotted Eagle and Lance Bachelder have some really good takes on downconverting HD to DV, editing in Vegas and then either upconverting back to HD or mastering to DVCAM - sure there will be some loss as you're going uncompressed to compressed and then back to uncompressed again but according to their responses, it's not only doable in Vegas but has fooled seasoned professionals at how good it looks.