Which settings are best to use and how do I remove artifacts after rendering? 

Try exporting the original edited 4k H264 material from a 4k timeline in FCP using these settings: File>Share>Export File>Settings:

Format: Computer

Video Codec: H.264 Better Quality

Resolution: 3840 x 2160

Normally that will produce fairly good quality on Youtube, Vimeo, etc -- if viewed in 4k on a connection with good bandwidth.

Whether you create optimized or proxy media in FCP, that should have no effect on the exported quality. However if you use proxies, do not export with the viewer in proxy mode. It should be View>Optimized/Original.

Compare the exported file using the above settings when viewed in Quicktime Player to the original file as viewed in Quicktime Player. Comparing the exported file to something uploaded to Youtube or other services can be misleading because that is re-transcoded by their cloud software. Every transcode causes "generational quality loss", especially if transcoding from one highly compressed codec to another.

E.g, if you transcode from 4k H264 to 4k H264, then transcode that output to another 4k H264 codec, that is two generations of quality loss. The quality loss is much worse for H264 or HEVC than for ProRes 422.

It is for that reason my team uses a DJI Inspire 2 and we record in ProRes 422HQ. The new Mavic 3 Cine can also record in that format. However if you export using the above-mentioned settings, the result after uploading to Youtube or Vimeo is normally (but not always) OK.

Another problem is evaluating screen caps of that video, especially after upload to Youtube, etc. The default Mac screen cap format is JPG, which itself is a recompressed transcode. Then when you upload that image to many web forums, they will again transcode, recompress and downsize that JPG image to another JPG image, further degrading the image used for assessment. So it's possible a posted screen cap may have 4 generations of quality loss: (1) Export from FCP to H264, (2) Upload to Youtube and reencode (3) 4k screen cap to JPG during streaming playback (4) Upload to web forum which re-encodes to another JPG. Each of those are H264 (or equivalent) re-encodes. Each one can entail quality loss.

If you Google "mac screenshot format", you will see instructions on how to change the default Mac capture format to PNG or TIFF. Those are better formats for comparison, but they are often too large to upload to web forums. Some photo forums like Smugmug will accept PNG which is better than JPG. If the web forum allows posting a URL to a full-res PNG screen capture, that is a better yardstick for comparison.

First, that's great flying. Super skills.

Definitely update the OS. I don't think the problem is in FCP, because the problem first appeared on M1 systems using 10.6.5, but it was in macOS 13.1. I'm not seeing it in the current OS 13.3. I compared an exported H.264 file with the original, and I couldn't find any spots that showed deterioration. The two files looked pretty identical.

I can send you my exported file if you would like.

What shot this exactly? Open one of the clips in MediaInfo or Invisor and post the report. I assume the shots are in motion because it's a drone. What OS and FCP version are you using? Is this an Apple silicon system? There have been problems with the M series systems decoder on difficult content like this.

It may or may not help, but is there any reason for staying with this particular combination of versions? Monterey is up to 12.6.5 (and some of the interim updates fixed relevant security vulnerabilities); FCP is at 10.6.5.

Tom, I examined the re-encoded file you uploaded and it looks pretty good for a casual drone video. There are a few relatively minor transient macroblocking artifacts on gradients during some rapid scene changes, which is not unexpected if the original material was highly compressed 4k/60 8-bit 4:2:0 H264 at a low bit rate of around 100 mbps.

It looks like some kind of DJI Mavic but I don't know the original file parameters. If it is 4k 8-bit 4:2:0 from DJI drones before the Mavic 3, this result is typical. It mostly looks OK. This kind of mild issue frequently happens when editing, grading or uploading material from that class of drone.

The newer Mavic 3 can record 4k/60 10-bit 4:2:0 using H264 or HEVC at up to 200 megabit/sec. The limited material I've edited from that looks pretty good. Even though it's not as good as ProRes 422 (Mavic 3 Cine and Inspire), it's significantly better than the prior DJI H264/HEVC codecs.

I tried your file in FCP 10.6.5 on my Intel Mac running Ventura 13.3.1.

Difficult material, as Tom very well characterized it, but FCP handled it well.

I tested a version converted to ProRes in the Finder, and then I tested the original. Both yielded a decent exported file to H264.

I think that it may be as Tom suggested, a problem with the decoding or encoding on M1 macs, but it may be worth trying to update the OS and FCP.

What OS and FCP version are you using? Would really like to see the full info or the footage if you could upload it to WeTransfer or Dropbox. Share the link here and it should be seen in the email notification.

What kind of artifacts and interference? Can you post screenshots or a piece of the video on YouTube? What are the complete media specs? What are the exported project specs?

FWIW, I did an identical test with your footage on a Mac Studio M1 Max, and the results are (to me) undistinguishable from what I saw in the Intel MBP. Both are pretty acceptable and have nowhere near the artifacts you got.

Sorry about the delay.

Here's the file.

https://we.tl/t-O24cqxLBYz

You should get the link in the email notification.