Hi, it's a service menu option you have to change. Make sure the TV is set to the DVI input (video7) first. Now go into the service menu...I can't post links yet but there is a thread here called "THE SONY SERVICE CODES - Articles, Comments, Discoveries" that covers it.
Please read these pages to understand what service mode is and how to be careful.
Use the 1 and 4 number buttons on the remote to cycle up and down through the options until you get to a setting called 'JUMP'. The default value is 1. Press the 3 number button to change the value to a 0.
Save the change by hitting Mute and then Enter on the remote. Turn off the TV and back on. It should no longer "squeeze" the image.
Also, can you please let me know what resolution and frequency you're using on the compuer? Are you using a standard resolution or a custom one? I have a 36XBR800 and getting a computer to work on the DVI port is a bit tricky. I haven't tried it using a modern video card but many years ago it was a pain to get the PC to work over DVI.