[peaktime]

I think it depends on what format it was recorded as. If it was recorded to a standalone DVD burner, then it's already been compressed once. Importing it into Vegas (or similar) and then cropping it, and then rendering it again would be two stages of video compression, which isn't allowed. If it was recorded on miniDV (DV-avi is not lossless but it is allowed to be rendered again) or to uncompressed avi, and then rendered in Vegas, that would be allowed.

But I think most DVD players have a zoom function, wherein you can just magnify the letterboxed 4:3 so that it plays without any black bars on a 16:9 display.