Pete,
When using the zoom feature on non-enhanced material it does stretch the image both vertically and horizontally and therefore fits it into the 16:9 screen properly when your pj is in the 16:9 mode. Before zooming, the image was a 16:9 letterbox inside of a 4:3 image centered inside the 16:9 screen. If you place your pj then (after zooming) into 4:3 mode the image should be vertically stretched. I will recheck this next time I turn on my pj and report back to you.
Rob