I presume you mean DVD rather than CD
(see note)
No problem.
You can either convert your clips to SD and edit in SD - this will be less taxing on your system but means when you come to to an HD version you'll have to start over again - or you can work entirely in HD, and when you come to "render" (File | Render as) you can choose what format to render as. Obviously you can render both a high and standard definition version.
(note: Actually Vegas will let you create a VCD (video CD) version, but I'm sure this isn't what you meant.