I have shot a short film on the AG-HVX200 PAL in DVCPRO HD 1080i 25p.

Now when I convert the MXF clips in HDLink should I deinterlace or not?
What are the pros and cons?

Also is there any reason not to upscale to 1920x1080, I like to have square pixels.

Thanks.

If you have 1080i 25'P', then no deinterlace is needed as you already have progressive frames. Just set the encoder to progressive, this optimizes the compression and help inform post operations that you have progressive frames.

I agree the up-res to 1920x1080 is a good idea, square pixels are a plus. The only downside is increased conversion times, and larger AVI files.