Yes, that's correct. If you shoot and capture HDV you have more than enough pixels to size it to fill a 4x3 frame vertically and then crop the left and right edges for SD output. Depending on how your editing software works this can be fairly painless, but working with HDV ultimately means more processing time at some point in the process.

All things considered I prefer to run my HDV camera in HDV mode because that gives me more options later on, plus that way I'm collecting HD footage for future demos even if current projects don't require that. (You'll have to store and edit the HD footage separately from SD for HD demo purposes.)

Downconvert.
 

I would, and have shot a lot of this type of material and I always shoot HDV with the 4:3 markers on the screen and then downconvert the footage in camera with the 'crop edges' function turned on and you will get pristine 4:3 DV footage that looks better than VX2000 footage (i have three of them and about 500 tapes to prove it) and something that you can use later on at full resolution for demo reels or something in the future. This is the only thing i would use it for since it wouldn't make any sense to cut in HD and DV footage in the same HD timeline and who wants to go back and reedit a wedding a year later. You can zoom in on the HD footage in post if you capture it at full resolution and edit it in a DV timeline, but I have motion issues with flickering and the like depending on my settings. If someone out there has found out how to cleanly play HD in a DV timeline without any kind of flicker or motion effect or filters then I would like to know. It's true that the FX1/Z1 footage will not look quite as good zoomed in at 100%, but for certain shots or shot lengths it will be virtually unnoticeable. Hope this helps.

Edge Crop Function
 

I think the original poster has a FX-1. There is no "Edge Crop Function" except on the Z-1, so any resizing to SD 4:3 from his camcorder would have to be done in his NLE.