making widescreen videos in imovie hd

i am currently using imovie hd on an imac g5 computer. i have purchased a sony dcr-hc90e camcorder which has a 'true widescreen' recording mode, which i used to take some footage. when importing to imovie hd i asked it to make a new project and i changed the video format from the drop down list from dv to dv-widescreen. however when i imported my footage, it did some 'letterboxing' and now i can see black bars along the top and bottom when creating my video. however when i add effects, like the 'flare' effect, it occurs over the whole image including over the black bars top and bottom. and when i go to share>quicktime movie at full quality, it comes out as a 'standard tv' size film, not a widescreen film. am i doing something wrong? should i have used some different settings to create a widescreen film so that titles, effects etc dont happen over the black bars top and bottom? any help greatly appreciated.