Just change the timeline properties from HDV to SD and rescale the image (Fit Best - Keep Aspect). If you go SD 16:9 the output will be anamorphic. If you go SD 4:3 the video will be letterboxed (on output and in the Liquid viewers). The quality will be reduced to SD quality in both cases.
If you want to make an SD DVD from your HDV material, work on an HDV timeline and then just output to DVD in the normal way. Liquid will do the downcovert to an SD anamorphic DVD and the quality will be excellent (almost as good as the original HDV material).