You say that the quality is good, directly from the camcorder to the TV (what type of interface are you using in that connection?). You are editing with FCE(4?) and burning in iDVD. 1 - when you are importing the stream into FCE, make sure that the camcorder setting matches the FCE setting. As anexperiment, try not to do much editing and output via File>Export>QuickTime Movie, as suggested previously. Burn an iDVD disc. If you still have quality problem, try Toast. these iMovie and iDVD programs are not for very discriminating users. Don't bother with the menus and other bells&whistles at first. Make sure you have a good DVD player and good connection to your TV, preferrably HDMI. Try not to do upconversion in the DVD player, let the TV do it. It knows the diplay technology it drives and will do better job upconverting and filtering the image than the DVD player, that does "general" upconversion.
2-iDVD will not burn h.264 and the DVD player will not play such stream. DVD player only plays MPEG-2 Program stream.
3 - I used to have that camcorder and didn't have quality issues burning DVD's with it. I mostly use Toast though. If you still have issues, you'd have to publish all the settings you are using for the camcorder, FCE and DVD authoring S/W to troubleshoot this furhter.
4 - Does your DVD player usually give you the video quality you would like to see?