I have a widescreen LCD TV as my external monitor
After following instructions on changing a video project to widescreen from 4:3, the width is larger but still won't fill up the
entire width of the screen - about 1 1/2 " on either side
On every widescreen TV I've seen, you have to set the aspect ratio to 4:3 or 16:9 manually on the TV itself. Usually the settings are set independantly for each input, thus you can have your VCR and cable inputs set to 4:3 while your DVD player input is set to 16:9. I'll bet you just haven't selected 16:9 for the particular input you're using with Vegas yet.
Are you sure? My experience is limited to about four widescreen TVs, but in each of these four sets you have to set the aspect ratio manually. I know that virtually every 4:3 setup does this automatically, but this is done at the DVD player where every fourth line is dropped before sending it to the TV. I've always thought that widescreen TVs should set the aspect ratio automatically, but I have never seen one that does.