Apple Intermediate codec or Pro Res 422

Is there a clear winner between capturing using AIC or PR 422 when working with HDV footage?

Yes. (For me) ProRes 422 is the clear winner. AIC could almost be considered a legacy codec now for most Final Cut Pro users. Not just because of the clearly superior quality of ProRes 422 and its better color sampling when dealing but also for other obvious reasons such as that captures to ProRes 422 retain timecode whereas captures to AIC do not.

I am assuming that AIC will create smaller files?

Correct. AIC, like ProRes 422, does not encode at a fixed datarate but rather a variable one so a direct datarate comparison is not possible. However, side by side comparissons show that AIC has the heavier filesize compression. (One users test showed that an identical 15 second clip encoded to AIC was 175MB versus 216Mb for the ProRes 422 encoding).

If I capture using either, can I still use idvd...

Yes

I've not done the tests myself, so this isn't first hand knowledge ... but the current collective wisdom seems to say that the in camera downconverts are not going to give you the better quality. The workflow seems to make most people happiest when creating SD DVD's from their HD masters is to use ProRes 422 as the intermediate.

Question for you ... why are you capturing as anything other than HDV? If you have FCP6 then you can capture as HDV (maintaining the pristine quality of the original, plus its low datarate/small filesizes) and edit using the native codec +but with your rendering using ProRes 422+. That way you get the best of both worlds. Export your edit master as ProRes422 and burn your DVD's from that (and for safety/backup you can conform a copy back to HDV tape too).

Here's a tutorial from Ken Stone's website on the mastering to ProRes for SD DVD thing:
http://www.kenstone.net/fcphomepage/hdv_timeline_to_sddvd.html

Gotcha ... well there's nothing wrong with that workflow per se. My suggestion is only that one doesn't need to transcode everything prior to capture but rather only those sections that are actually used in the final edit (ie transcode it at export). Every action has its pro's and cons tho, the capture as ProRes method would result in media files around 6x bigger than that of HDV or DV ... as long as you have the storage capacity to handle that, and as long as those drives are sufficiently fast enough to deal with the vastly increased data rate (for possibly multiple simultaneous streams of the same during editing) then you're good to go. With the right equipment, editing in native ProRes is a breeze. The capture as HDV and edit as HDV (with renders as ProRes) means much smaller file sizes / lower data rates, so more modest equipment can easily handle it. The downside would be that when rendering in the timeline (or for export) your render times would be slightly longer as the app still needs to deal with the more computationally intensive HDV codec as its source (although the target for the render is the less intensive ProRes) ... of course, this is still very much faster than rendering/conforming back to HDV!

The choice ultimately is yours, and if your client is happy to let you experiment then I'd encourage you to do so and see which works best for you and your set up. I know of those who do exactly as you've been advised in your training, others who's preference is to capture as native HDV and then edit with that directly in a fully ProRes timeline ... but for me, my preferred workflow is as follows:

Choose the appropriate HDV Easy Setup and then Log and Capture the footage.
Create and open a new sequence, open the Sequence Settings window > Render Control tab and set the Render codec to ProRes 422
Edit ... and when the edit is complete choose Export > Quicktime Movie w/ settings as Apple ProRes 422 ( +not Current Settings+ )
Take that exported movie into Compressor (or DVDSP) for making your SD DVD

My experience with HDV is that FCP has a hard time retaining media links with the files and will lose track of file names so that the relink window shows only a blank and you have to manually locate the media file. When I convert to AIC, the problem goes away once I relink the files. That is the main problem I see with HDV. I have not used Pro Res 422 because the files are so huge.