Yes, it shows pretty HD pictures... It's a nice set.
Yes, they are letterboxed as the set is 4:3.
No, they are not distorted as they are letterboxed.
It's now a new set, but for inexpensive HD, it's a real nice set unless you need a flat screen for the wow factor or you must have the "squeeze" feature for maxing res on DVDs. The set displays DVDs nicely, just not as nice as "squeeze capable" sets.
Mark