Apple Final Cut Pro 7 - Manual (Page 517)

To do an overwrite edit
µ
Drag the clip to the lower two-thirds of a track in the Timeline.
Drag a clip to the lower
two-thirds of a track to
do an overwrite edit.
Note: If you drag a sequence clip to another location within the sequence, an overwrite
edit is performed by default. To perform an insert edit instead, hold down the Option key
after you begin dragging the clip.
Automatically Adding Tracks to Your Sequence While Dragging
You can drag a source clip to the unused space above or below the current tracks to
create a new track for that clip. If you drag your clip above the tracks already in the
Timeline, you’ll create a new video track. If you drag your clips below the tracks in the
Timeline, you’ll create a new audio track.
517 Chapter 35 Drag-to-Timeline Editing