The best way to work with Compressor is to create a QuickCluster with the Qmaster System Preferences pane. If you tick "Share" next to "Compressor" and assign one instance per core, then "Start Sharing", you should be set. Note that you may be able to start more instances than that, but be wary. My 4-core machine has 8 virtual threads, yet I can max the machine out with 4 instances.
So, all is well, right? Well, the new Final Cut Pro 7 has a "Share" feature which lets you keep working while Compressor does its thing in the background. (In FCP 6, if you sent directly to Compressor you had to wait for it to finish before you could continue work.) The problem is that FCP 7 doesn't let you send to a QuickCluster. (It tries, but fails. For me, and documented here too.) If you can't send to a QuickCluster, most of a Mac Pro's CPU power is sitting there unused: maybe 300% of the 800% (100% being one thread) is used. More CPU power (600%+) is used by QuickTime Player, for goodness' sake.
The solution, then, is to do exactly what you'd do under FCP 6. Ignore "Share". Don't "Send to Compressor". Just export a full resolution QuickTime movie and give that to Compressor yourself. You can continue working in FCP (just as you could in v6) and Compressor will use as much horsepower as you've got.
I'm a little mystified as to why Apple would cripple such an easy-to-use, obviously useful feature. Maybe the performance hit doesn't hurt so much on an iMac or MBP, but waiting while a Mac Pro sits even partly idle is just painful. Let's hope they add just a little sprinkling of Grand Central Dispatch multicore-goodness across the whole studio and make this all go away.