There is no down-conversion that I am aware of on the HMC40/41. You need to import your footage into Premiere Pro (or whatever you use), and either import it into a SD timeline or edit in HD and export the final result as SD. DV and HDV cameras did this during the firewire download of the footage, it isn't something you can do with these file-based cameras.
I do it the second way, editing in HD, then you have more options when you come to export. Of course, your computer needs to be fast enough for the job.
