Sorry if this is covering what you already know. Just thought I'd share my 7D workflow - as I've been shooting with the 5 & now 7D for about a year now.
I hold onto the H.264 as a backup - but never edit with it as its clunky.
I transcode (through batch lists) all the footage into Apple ProRes 422. It's great for editing and the image quality is virtually loseless.
I use MPEG Streamclip (free) for all transcoding.
Hope that helps.