How do you fit still images (jpegs) to match clips in Final Cut Pro 7?

Transform shouldn't distort the image but that's what you'll need to do if you want to fill the frame without a black border. You'll be enlarging the image so it may or may not suffer from that but you'll want to use the transform tool. Alternatively you could resize the image in Photoshop, cropping it and then enlarging it proportionately.

Now, are you asking about a procedure in FCP7? Cuz this is the FCPX forum. But, if you are asking how your conform images to fit "LIKE" FCP7, but in FCPX... Here's how. In addition to the transform / crop tools, go to your inspector. In the "Spatial Conform" section there is a drop down for "fit."

edit the image into the timeline, place the playhead on the clip in the timeline and select the clip in the timeline. Make sure your canvas is set to image and wireframe. Make the scale of the canvas small enough so you see some are beyond the edge of the sequence dimensions. Click and drag any corner to scale appropriate and then click and drag anwhere else in the image to position appropriately. Scaling this way should not distort the image unless you're holding the shift key down.

Don't expect great quality of your scaling up a great deal.

Here's an alternative way if you don't like the results of upscaling.

Create a second track (v2) and put your stills on v2.

From the Generator, choose Matte and in the Controls tab choose a color with the the magnifier that is appropriate to the shot on v2.

Good luck.

Russ