Strictly speaking the Isco II isn't a true CIH device since it magnifies the image height by approx 5%,so moving it out of the way means that for 1.85:1 content especially, you are left with black bars that (for me) are big enough not to ignore.
If I'm watching a 2.35/2.40:1 disc when using the lens, then I just use my Lumagen scaling for 16:9 menus and trailers, since I'm not concerned about full pixel use for these parts, so I have the instant AR change that the Lumagen provides with the lens in place. However, using the X35's lens memory I can select my '1.85:1' setting just before I physically lift my lens out of the way and by the time I've sat back down the image is adjusted perfectly to fill the screen height for a 1.85:1 film, so it's no hardship. In fact I have some simple side masks that I clip each side of the screen, so that takes me longer to change than the lens/zoom adjustment, but the lens memory saves an extra step compared to my old HD350.
Like a lot of things in my life, if I put a little extra effort in then I get the maximum out: I prefer to use the full pixels for both 2.35/2.40:1 and 1.78/1.85:1 so I don't mind the little extra work, I tend to put my lens away after use anyway since my projector is in my living room and IMHO lenses aren't the prettiest of things to have on show, so it suits me anyway. However, I can understand that some might want to use a fit and forget arrangement as it's simpler to use and if the majority of viewing is 2.35/2.40:1 then the 16:9 lens in place compromise isn't such a factor.
Zooming: Been there, done that, bought the lens...