Believe it or not, Toshiba actually made standard definition CRT TVs with component inputs yet without the "enhanced definition" setting, so output from my AppleTV is pillarboxed (3:3 instead of 4:3) or stretched vertically (wide-screen content appears almost 4:3). While this makes overweight, overpaid news anchors look svelte in their podcasts, it's not a great result when viewing movies or TV shows or ... everything else.
I'm not ready to drop $800 (or more) for a flat-screen HDTV, so I've been asking for a hack that would alter the AppleTV's aspect ratio. No luck. I've also been asking Apple for a new setting in the AppleTV settings, but Apple is looking towards the future and not the past.
I did manage to find a reasonable workaround, however, and it's easy as pie (or a piece of cake ... whatever). You will need QuickTime Pro. Simply open the video and press Command-J to show the video's Properties. Click on the Video track and alter the Scaled Size on the Video tab to 75% of the original height. You must uncheck Preserve Aspect Ratio. I use the closest multiple of 16, although I'm not sure the AppleTV requires adherence to the "rule of 16s." I then use File » Save As to save a self-contained movie and drop it into iTunes.
The result: All 4:3 video plays full-screen, and wide-screen content plays letterboxed. I'm working on an AppleScript that will do this as a "droplet" to make the process simpler.
Mac OS X Hints
http://hints.macworld.com/article.php?story=20070819100222814