Apple Final Cut Pro 7 - Manual (Page 20)

20 Chapter 1 A First Look at Final Cut Pro
Try This
Use the Canvas to place a clip in the Timeline:
Drag the clip from the Viewer (just drag the image) into the Canvas until the colored
m
Edit Overlay appears. Drag the clip to the Insert section of the overlay. The clip is
inserted in the Timeline.
Drag from here... ...to here.
If you see a message asking if you want Note: Final Cut Pro to set the Timeline
sequence settings to match the incoming clip settings, click Yes.