Can a scaler compress a 16:9 image back to 4:3?

Since you have rather free control of all aspect ratio factors, you can do whatever you want with the picture, including stretching or compressing it to any format you like. All major videoprocessors can do this.

Yeah you can setup any of the current good VPs to do this with one button.

Only if it's an even stretch. Some of the channels use that type where the sides are stretched more than the middle.

TNTHD plays a ton of old television shows with a non-linear stretch. I finally gave up on cable with the ever growing selection of HD media titles, the writers strike going on, and the lack of OAR on most stations.

On a related note I used to have my Oppo 970 set on 16:9 squeeze mode to automatically select between 16:9 and 4:3. When I compare a sharpness test pattern between this and outputting in 16:9 and having my VP do the "squeeze" to 4:3 I encountered a noticeable quality difference. The horizontal lines on the pattern would clump up with the Oppo's squeeze but is nice and uniform using the DVDO's squeeze. There was enough of a difference for me to now toggle between 4:3 and 16:9 manually for DVDs. I suppose this seems logical that the VP would be better product in the chain at changing the AR for my television, yet it took me a couple of months before I realized this!