Well, I have finished my masking system for wall mounted screens. The top and bottom panels are completely contained within the screen border. This is on a 90" 16:9 laminate screen.
The basic design is that the top and bottom screen border pieces have extra velvet tucked behind them. These pieces can be moved up or down to mask off the screen, with the extra velvet filling in the space to cover the ugly gray bars. I needed something light to make up the backbone of the border since it would need to be easily moved up and down. Taking from warrenP's design, I started with foam board. I cut the boards into 3.5" wide strips (the width of the border). Since the boards were only 30" long, I had to attach multiple segments together to get to the correct length. Once again borrowing warrenP's idea, I used thin metal rods and tape to hold them together.

In practice, this didn't work. The top and bottom pieces sagged in the middle. So, I had to find something more rigid but still light. My first thought was luan, so I had a sheet cut into a few 3.5" strips at the store. The luan worked beautifully and did not sag at all.
Next I had to find a way to attach the top and bottom pieces but still have them be easily removable. Magnets were the logical choice so I picked up some ceramic ones from Home Depot. It didn't take very long to realize that they wouldn't be strong enough to hold the masks, so I went on the hunt for some rare earth magnets. Luckily I found a local magnet supplier that thought that my project was so cool that they gave me some for free.

These things are so strong that it's scary. I had a hard time pulling them apart from each other.
Since the magnets are so strong I knew that I would only need one to contact a piece of metal (rather than having the magnet contact another magnet). Since the magnets were 1/4" thick, I easily mounted them into the luan of the top and bottom border and then taped over them on both sides to hold them in place. I used one magnet on each side of the piece.

To give the magnets something to stick to, I taped metal washers around the screen in the correct locations.


Next I had to determine how large the masks would need to be. For scope movies, I would need masks on the top and bottom that are about 5.5" tall. That is from the top and bottom of a 16:9 image to the top and bottom of a 2.35:1 image. Since I'd also need to have a 3.5" border above that for 16:9 viewing, I cut the velvet to 9.5" in width (also allowing some overhang for wrapping). Then I laid the luan out on the velvet.

And wrapped the one edge around tightly.

The top and bottom pieces are identical.
Next, I built the two side pieces of the border. I cut the luan to the correct height and then attached some washers at the correct points for when the masks would need to be in the scope position.

Then I wrapped the piece in velvet.

The side pieces were attached with velcro (to allow for slight adjustments to be made as needed.
Next I simply attached the top and bottom pieces in there scope positions using the magnets and then pulled the extra velvet tight and attached it to the wall with velcro. Then I detached the pieces and moved them up/down to the 16:9 magnet position. The extra velvet folds right behind the luan piece and disappears.
Here it is in the 16:9 position.

It looks just like a regular screen border.
And here it is moved up/down to the 2.35:1 position.

Moving it between the two positions is super easy. All you have to do is pull it free from the magnets and slide it up or down.
Finally, here's some pictures of the system in action with a movie playing. First, no masking.

Second, with masking.

With the lights off everything disappears.
Taking away those gray bars hides the fact that the image is actually smaller than the screen and really brings you into the movie more. I love it and think that the system is a massive success!
I hope that this opens up the idea of a hidden masking system to a whole new group of people, those without false walls but instead a screen mounted directly to the wall. It wasn't very expensive, went together fairly easily, and adds a ton to the movie watching experience. It is definitely one of my favorite features of my theater room.