what i did instead of deleting all non HD shows is i go into get info and change the show to the name of the show and add HD to the end. if you do that to every episode it looks clean in itunes so you have one seperate season in SD and one season in HD.
Wanted to update this thread and say that the new iTunes 8.0.1 version seems to have fixed the problem. At last! It still would have been nice to have an official acknowledgement of the problem.
When downloading HD content now, it appends "(HD)" to the end of the filename - so downloads no longer overwrite each other. Another neat touch is that it groups HD and SD content into a single entry in iTunes, with a little [HD-SD] symbol next to the filename, so you don't see duplicated files.
Now there's only the little problem that the store credits Apple gave me for deleted HD episodes don't apply to the HD version when I try to re-download... ugh.