Program to stretch 16x9 movies to 2:35.1

That is a projector job, you should have your projector to do that.

If you ask this question, I afraid your PJ does not offer that? What model of PJ do you have? My PJ, AE4000, is just a press a button I can switch 2.35 and 16:9.

Not if you're using an HTPC, it should be the PCs job, as should all scaling (what happened to the standard HTPC mantra of "1:1 Pixel mapping"?)

Unfortunately PC Blu-ray software sucks, so the only real option is to use something like YXY to resize the PowerDVD or TMT window to the correct stretch.

I've never understood the reason for this well... I could understand cropping off the black bars of a blu-ray and stretching the video to a fit a 2.35:1 screen but if a blu-ray comes in 16:9 or 1.85:1 wouldn't stretching the video just make it... well looked stretched... making people and the world look fat, etc.

Why would you change the original aspect ratio of a movie?
That completely detracts from the viewing experience (as the director intended).
Going from 16:9 to 2.35:1 will stretch the screen horizontally, making everything skewed.
A better use of the 2.35:1 screen would be with an Anamorphic Lens. It will get rid of the horizontal black bars on movies with an aspect ratio higher than 16:9.

Anamorphic lens' can be extremely expensive though, if there is a good software alternative that would make sense as a cheap alternative to me. But I agree it would only make sense to fill a 2.35:1 screen with a 2.35:1 video..

$125 for two prisms, two pieces of cardboard, some double-sided tape and some time and effort.
Of course this build is crude but there are countless DIY enclosure builds available on the internet; here's an excellent one.
All told, you can have a decent lens for less than $200.

A lens changes the physical shape of the light coming out of the projector from 16:9 to 2.35:1, there is absolutely no way to do that with software, you need glass.

Assuming the projector outputs at 16:9 1080p, isn't it easier to just move the projector back, make it brighter and use 2 pieces of paper to block off the light above and below?

Sure, if you use the glass method, you will use the PC to upscale the 2.35:1 video to 16:9. But the cheap prisms are not going to do a better job than the native lens of the projector. So all the benefits are negated.

Not really, first, you can't always move it back.
Second, moving it back makes the picture dimmer, about 44%.
You can't always make it brighter, and doing so generally has consequences from higher noise level (high lamp verses low/eco) to reduced contrast.
And lastly, there's no place between the projector and the screen (other than very near the screen) that's within the focal plane, so anything used to block light would result in a very blurry edge, not a sharp one. The only two places you can achieve sharp masked edges are at the screen, and directly at the imaging device inside the projector.

If my room was deeper, I would love to do this. I use an AT screen (only center speaker is behind screen) but I do not have enough depth to my room to place mains behind the screen. I have a chase on the back side of my screen (in the middle) and that allowed me to cut into it so that I could recess the center speaker. My screen is only 5" off the wall and that space is used by my mechanical horizontal masking system.

Not at all.
In fact the disadvantages far outweigh the benefits.
First and foremost, the lamp light that is blocked (& lost) by the black bars is reclaimed.
Making the image brighter will reduce the lamp life (a lot).
The 'cheap' prisms are specially made by the company for use as an Anamorphic Lens and come with AR coatings for better optical performance.
Putting everything aside, the feel of watching the movie with the lens is something else.
Everyone who has watched a movie on my setup agrees on one thing: the setup might not be for them but the viewing experience is simply amazing (for a Home Theater).

Thanks for the link. I have book marked it. Looks like an excellent DIY project and it is not even very complicated. Maybe some day I will have the space to do this.