Hi Daz555 I have asked about this problem in another thread and it appears openelec forces the lettbox format for 16:9 videos. I wish this would be fixed as this is the only thing stopping me using openelec over my old xbox.
I'm guessing this is a restriction in omxplayer rather than xbmc. I'm sure it will be looked into at some point. I have a 1024x768 16:9 plasma with same problem (and workaround).
Non stretched\zoomed 4:3 is good in my book so I'm not worried about that.
I'm in the same boat. I've got a 16:9 plasma that displays 720p fine but only reports 1024x768 and 640x480 from EDID response. When I set the config.txt to ignore edid and force it to display 720p xbmc refuses. Using the same 720p config.txt with a raspian image it boots into 720p. I'm guessing that xbmc falls back to VGA if the EDID is not available.