I found this does not work. No matter how many times I deleted the video and downloaded after changing the settings from this link I would always get the HD version downloaded.
However, I found a way around this:
1. Go to the Store part of iTunes, select Purchased on the RHS column.
2. Unselect the Download HD When Available (at the bottom right of the window.
3. Download the movies from this Purchased area.
If you leave this area iTune forgets the Download option and tries to download the movies back in HD else where. You will know the movie downloading is SD since the file size will be smaller...
Using this method you will also end up with both your SD and HD version of your Video in iTunes.
A bit of a hack for an Apple product, but I hope this helps someone.