Sure is an ugly screenshot. They usually look like this:
You can see that your AR (DAR) is 1.9:1 which is where your problem lies as MC in DVD mode does 1.33 (FS) or 1.78 (16:9).
Here's a solution courtesy of Mistycat:
Use this calculator: http://www.tomzavodny.cz/program/bitcalc/index_en.php and at #8, enter your origonal resolution, select target resolution (NTSC/PAL) DVD = 720 x (480/576)and enter the new resolution at Crop and Scale. Untick keep proportions and encode as 4.3. Increase height by 1.33 to encode as 16.9 and remember to untick keep proportions in Crop and Scale only. As an aside, I usually encode as 16.9 because the letterboxing is smaller and if the resolution still falls below 720 x 380, I cheat as it's hardly noticeable unless you're looking for it.
The calculator puts your numbers at 720x338 (NTSC) for a FS encode (I always use even numbers) for a 16:9 encode you would chose 720x448. Note, because of the original AR a 16:9 encode will still have bars. If you want to eliminate the bars so it completely fills/fits a 16:9 set you will need to crop the sides. This works pretty good. Choose 16:9 in MC and reset the Scale to 720x480. For your Left/Right crop use 32 (480-448= 32).
