What happens to old 4:3 content in HD world?

This question has been bugging me, and I can't find what I consider a good answer anywhere on the net. This may be my search skills.

The new HD standards (and I'm lumping HD-DVD, Bluray, and HDTV here) are now 16:9. So now we don't lose (as much) resolution to letterboxing, as well as waste (as many) bits encoding the black areas. (Note, I am aware of the 2.35 etc. issues. Which is why I say "as much".)

But what about older material shot in 4:3. If we go back and rescan them in higher resolution do we now have to encode two "pillars" of black material into the stream?

I guess what I'm asking, is whether you have to brodcast (or encode for discs) the full width. Or can you tell the player (or TV) "this material is 4:3"? The old DVDs have this option, only in reverse, for anamorphic content.

This might be an obvious question, but it really has me wondering. I understand that there probably can be a different answer for HDTV, Bluray, and HD DVD.

I know about pillarboxing, I just wanted to know whether you had to encode the bars or whether you could save bandwidth (and storage space) by saying "this is 4:3". I realize that solid black encodes nicely, but the boundries don't, i.e. the line down each side between the picture and the bar. After all, sharp edges are where most encoding have the most trouble.

My interest is mostly academic. I agree that while you might go through the trouble to hook up an anamorphic lens for 2.35 material (movies) I can't imagine doing it for 4:3 material, which would be mostly older tv shows other shot for TV footage. Although weren't some of the really old movies shot in 4:3?

Mostly I was watching some SD content the other day and thinking how bad it looked, and wishing everything was broadcast in real HD (even the 480p stuff is noticable, although better). Then I was wondering whether the spec had taken into account that a lot of material out there is in 4:3, and whether we were going to have the reverse of the letterboxing problem as things moved to HD over the next 10 years or so.

Looking at my reply and the previous replies I got I want to be clear here. I understand the current options the studio/broadcasters use -- i.e. pillarboxing, stretching, chopping. I was wondering about the specification, or what is possible technically.

Everything I've read says there are four current HD modes, 480p, 720p, 1080i, 1080p. (I've also seen a couple odd ones thrown around like 540p, but they don't seem to be standard. Maybe I'm wrong. [Oh, and I also know some people call 1080i 540i, moving on. . .])

It just seems so odd to me that with about 80 years of footage in 4:3, the spec seems to ignore it completly. I applaud the move to 16:9, but why was the "legacy" 4:3 ignored as even an option? It's not like the manufacturers would have to add a lot to the display, it simply wouldn't use some pixals.