How does the stock script "Remove Letterboxing" work? It doesn't seem to change the frame size of the generated media, or the pan and crop, so what does it actually do to remove the letterboxing? For example, if I have a 720P project, and I put some 4:3 media on the timeline. Thanks!
It does.
You will notice the rectangle representing the area cut in the Pan/Crop workspace will be modified (smaller).
Also the value for width or height will be modified to adapt to the project aspect ratio.
To use your example above: Given you're in a 720p project - 1280 x 720 pixel project size.
You put in a 720 x 576 SD 4:3 video, which will result in a preview with large pillarboxes at the sides (if you didn't adopt your preview).
Unaltered Pan/Crop will always conform your media properties, so in this case its values for width and height are 720 x 576.
Now after having used "Remove Letterbox" scripting, Pan/Crop's height will be 442,5.
Also, if you carefully look onto that little rectangle on the timeline Event, you will notice it is slightly colored after having used the script, indicating Pan/Crop modified your Event.