Have you tried trashing your Final Cut Pro preferences? It is usually the first step when FCP begins to act in unexpected ways.
Download Preference Manager (free) from Digital Rebellion
and use it to trash your preferences - they will be set to default the next time you open FCP.
If that does not remedy the problem, do you have any still images in your timeline that are not RGB, or are greater than 4000 pixels in the widest dimension?
Is your source material in an FCP7 edit friendly codec?
If you have problems locating a problematic clip in the sequence, select the first half of the sequence and remove attributes. The idea is to keep narrowing the selection before you remove attributes til you find the problem.
You could also have a corrupt sequence. To fix a corrupt sequence, create a new sequence with the same settings as the problem one. Make the original sequence active, select all, copy. Make the new empty sequence active and paste.