We are not discussing what happens in iDVD 7 but a bug in iDVD 6.
Things worked exactly the same in iDVD 6
But never mind, I just don't think you are getting it.
Actually, I think YOU are the one 'not getting it'. I understand the NTSC issue completely
There may be other PAL related problems in iDVD 6 or 7, but the pan & scan vs letterbox issue with NTSC DVDs isn't one of them. I can guess why Apple designers made the choice they did: I know some people DON'T like the black bars on the top and bottom of a letterboxed image and don't mind the edges being cut off in 'pan & scan'. Here in the US you can buy the same DVD in either 'letterbox' or 'full screen' (sort of the equivalent of 'pan & scan') versions.
The way iDVD creates a 16:9 DVD (at least for NTSC) it is the user who decides how to view 16:9 content on a 4:3 TV set - it makes sense to me.
All this will become meaningless as everyone converts to 16:9 TV sets.
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The OP has two choices: simply change the set top DVD player setting to 'letterbox' or use myDVDEdit to modify a disk image file and then burn the final DVD. I really don't care which method he chooses, but the issue (at least for NTSC) isn't a bug.