Your camera shoots 16:9. So your projects in both iMovie 8.0.6 and in iMovie 6 should be 16:9.
The only reason to consider 4:3 is if your only television set is one of those old 4:3 models. (Not that there's anything wrong with that. I still have one.) I suppose it could also be an artistic choice to do 4:3, but you either have to crop off several lines of pixels or use letterboxing to have 16:9 reduced to 4:3.
In your iMovie 9 project, you should go to project properties and set it to 16:9.
For each clip, you should use the Rotate, Crop, Ken Burns Tool and choose FIT. (Actually, if you are using 16:9 clips in a 16:9 project, FIT and CROP should both give the same result.)
Then when you import event clips into iMovie 6, they should be 16:9 also.
The reason I was using 4:3 is to avoid having that black part below & above the video. If I actual set the project for 16:9, will that fill the picture screen? I've got a flat screen that's alittle more than a year old so I assume it takes 16:9. Is 16:9 a better quality than 4:3? If I follow your advise on the project, will that eliminate the black part above & below the video?