There's been lots of discussion on this board about aspect ratio, pixel aspect ratio, and so forth. The important thing to remember (for me, at least) is that DV was NEVER defined to be 4:3! It's actually a bit wider than that. Here in the NTSC world, a 4:3 image on a square-pixel PC monitor would measure 640:480 pixels; if we instead use the official 0.9091 pixel aspect ratio of the DV format, we would get 704:480. But DV actually uses 720 pixels on a horizontal line, not 704! Ergo, DV is slightly wider than 4:3.
My math is rusty, but it seems to me that if you wanted a 16:9 aspect ratio with 720 horizontal pixels, you'd want 720*9/16=405 vertical pixels IF you had square pixels. Since you actually have pixels with an aspect ratio (in PAL, presumably) of 1.0926, you would need a final image measuring 405*1.0926=443 vertical DV pixels to get a 16:9 image.
Anamorphic is a term used to define a lens ground differently in the
horizontal plane than the vertical plane. So with 16 x 9 (1.85 x 1 ratio)
the vertical portion of the lens is left untouched while the horizontal
is ground to "skinny up" the image (people look skinny) and compressed
to a ratio of 1.85 x 1. This was done in the film days to get a wide
picture on the standard 4 x 3 format. When projected on a projector
the anamorphic projection lens spread the image back out to normal
on the screen thus giving you a wide picture of 1.85 x 1. The anamorphic
lens was invented sometime in the late 1800's and utilized in the 1950's
as "Cinemascope", "Panavision" etc. only these compressions were 2.66 x 1.
Actually, "my kind of widescreen". These movies are now shown as
"letterbox" on existing tv sets. Anamorphic adapters are available for
some camcorders on www.century.com and optex I think.
You might try selecting the Multimedia Preset (PAR 1.0) in the pulldown menu for the project properties / render properties... your source can be DV or DV widescreen.
My person preference would be to crop/scale the horizontal... I suspect viewers are more sensitive to space limitations in headroom/chin-knocking than negative-space at the sides.