I just tried it - it allows import very easily but almost no playback inside FCP7 on my setup, even though playback is fine outside FCP using Quicktime or VLC. My system (MacBookPro 2.4 GHz Core2DUo 4GB, OS 10.6.6 - Matrox MXO2 Mini to HP LP2475w 24" monitor) fulfills all the official requirements but from reading other places you need more powerful hardware than the minimum stated to stand a chance of it working.
Even Premiere needs massive power to play H.264 fluidly, and FCP7 was never optimized for it. If you need to stick with FCP7, do yourself a favor and transcode to ProRes.
Yes, so clearly, it's not a viable option for playback within FCP. I'll stick with transcoding to ProRes for now. I've been holding off on transitioning to a different NLE as I have a lot of ongoing projects already in FCP. (And I was hoping Apple might come around.) However, it looks like I'll be switching over to something before long. Probably Premiere, since I already use AFX so much.
FCPX plays the native files back a lot better than FCP7 did, but I'd still recommend transcoding even if you had FCPX.
Here is an interesting comment from the Adobe perspective that may be of interest:
"Adobe CS5 reads the H.264 files natively into Premiere Pro and After Effects at the highest possible quality. Our color gamut and dynamic range for tonal detail from shadow to highlight is unsurpassed. There is even support for over-brights beyond 100% in After Effects. i.e. in plain English, we squeeze more out of these files than anything else out there! Shane Hurlbut’s filmout tests at Laser Pacific have verified that our interpretation of the H.264 is the smoothest and most filmic representation available. The magic comes from the use of proprietary interpretation algorithms and I might also mention that we bypass QuickTime for this process, which avoids the whole gamma conundrum. Once the file is living inside our apps on the timeline or project, we deal with the image information at the 32 bit float level...."
See link: http://www.f2films.com/blog/why-use-adobe-cs5-to-edit-footage-from-canon-dslrs-5d-7d-t2i/
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