Wow allot of question...
Okay color grading and color correction.
Where the cameras the same model during the shoot and white balance. Check your white balance on your footage. I am assuming this is your first try with color correct? If so you might want to do some research for the basics on the web or check Amazon or your local library for some books. If you are still rocking Final Cut Studio there are some nice book out there that will give you good start.
Color Correction in Final Cut Studio
Final Cut Pro 5 Color Correction
Don't get frustrated at first, coloring is something you do not learn in a week.
But, if you get you footage correct balance (FCP7 here might be easier thanks for the eye dropper) it will be easier to match your footage depending on the situation that is. Here I would need to know more information.
For you footage settings, if I understand this correctly you are sending a 1280x 1080 (interesting format do you mean 1280x720?) to Compressor and dropping the
MPEG-2 for DVD Droplet?
If this is the case, the
MPEG-2 for DVD Droplet Video Encoder with and height is
720 x 480 in a
NTSC CCIR 601/DV aspect ratio. You are using Compressor 4?
Try creating your own Droplet by using
Stream Usage Generic and
Video Format HD 1920x1080 in the
Inspector
The Fuzziness is probably coming from the compression and low resolution.
Oh yeah you might want to look into upgrading to Blu-Ray or checking out DL-DVD's.