This hi-def stuff continues to confuse me.
I'm about to start a new project that will ONLY go to my Website as an .flv file. If I capture in HD .. process a HD project in PE7 .. but then share using the NTSC Flash Video 8 700K (640 x 480) option .. have I accomplished anything processing a HD project? Even though it's only 640 x 480, is it still higher quality than if I processed it as an SD project?

If your final export is to standard definition you will gain no increase in quality by working in a high definition project. Infact you could end up with worse quality... depending on how the video editor down sizes the video. If you intend to work in a SD project your best work flow is probably to downconvert in the camcorder and capture as standard definition DV-AVI ( assuming you have a HDv camcorder as I believe you have).

Yes, my camcorder is HD .. and I always shoot in HD .. as I'm always mixing and matching pieces together (often at a much later time), and never know what the final product is going to be before I start shooting. So am I surmising that if I'm going to end up with a flash (flv) file as my end product, I should at least process as an SD project in PE7, not HD?

As Paul suggested, the best way is to carry on recording in HD (just in case you find a future use for your footage) but downconvert in camera to SD for those .flv projects.

Thanks, John .. and Paul. Haven't done the downconverting process yet, but will check it out.