Jus tried a few videos myself, and I'm pretty sure it's stuck at the native resolution of the video.
If I'm not mistaken, the Samsung Focus has an 800x480 screen, so close to 16:9 aspect ratio.
- The Guild (series), downloaded from Zune, 16:9 ratio = fullscreen
- Video clip I uploaded myself, 4:3 ratio = black sidebars
- Video clip I uploaded myself, 16:9 ratio = fullscreen
In short: doesn't look like there's an option to stretch video on the phone, and if you want fullscreen I recommend anything with a 16:9 ratio (there are some on Youtube, but limited).