MPEG4 avi

I’ve had my WD TV for about a month and have to say nice peace of a kit. Exactly what I needed. Most of my movies come from TS (transport stream) from my sat receiver so I convert them in to MPEG2 (after cutting all adverts etc.). But when I do MPEG4 I end up with a letterbox inside my TV. Probably resolution, but I have tried lot of things and no joy. One thing would come handy and that is the zoom, which at the moment you can 1x, 2x, 4x and 8x. But 2x is too much and is too close. If new software could deal with it and try put one in between for 1.25x and 1.5x that might sort it. But I still think there should be a way to rip DVD to MPEG4 in such resolution without that letterbox. Does anybody experience similar problem? Thank you

Some DVD VOB files have the wrong aspect ratio in them even if the IFOs have the correct one.

I use to fix, with good results.