If you create a 4:3 aspect ratio DVD - that is what you have created - there is no letterboxing or any other kind of 'boxing' involved in iDVD.
The way the DVD is PLAYED BACK is a function of your DVD player software (on a computer) of the way you have set up your set top DVD player.
In general, CRT based TV sets will cut off content around the edge of an image because of overscan. (Overscan is necessary to hide the various sync pulses necessary for analog TV signals.) When you play a DVD on a computer monitor, there is no 'overscan' to contend with and you will usually see everything.
If you want to shrink your video so that everything shows on a TV set, you wil need to do something like this:
http://homepage.mac.com/profpixel/QT_Pro_7xmasking.html
F Shippey