I’ve not going to claim to be an expert on this (and if I’m on wrong on something, feel free to correct me), but here’s my take on how the pixels work (NTSC).
DVD video files are stored on the DVD at 720x480 with a digital flag specifying if the video is to be full screen or wide screen.
First thing that happens is 8 pixels are chopped off the left and right hand side of the video frame (this is due to the legacy of overscan). This leaves a 704x480 video frame.
If the digital flag says the video is to be full screen, then the video is resized (squished) to 640x480 (giving you a 4:3 ratio) and then displayed.
If the digital flag says the video is to be widescreen screen, then the video is resized (stretched) to 853x480 (giving you a 16:9 ratio) and then displayed.
If any other aspect ratio needs to be displayed, then the video is padded with black borders right from the original encoding.
A little bit complex, but it allowed for both widescreen and full screen on DVDs and allowed for some compatibility with older TVs. HDTV/ Blu-ray largely corrected all this (but then they had to introduce more than 1 resolution…).
Lots of DVD players have also added extensions to their player allowing for Jpegs to be played directly.
My suggestion would be to first figure out if you want widescreen or full screen. If you want widescreen, prepare your pictures at 872x480 (keeping in mind that the edges will get sliced off). At the end, resize them to 720x480, introducing distortion and making everyone look tall and skinny. Then encode those pictures as is using the correct flag. The DVD player will chop off the 8 pixels on either side, stretch it to 853x480 and then display it. That should return the picture to its original unstretched self.
If you want full screen, start with the pictures at 655*480, resize to 720x480 and use the correct flag for when encoding.
Of course this is only if you really want to get into the details, many programs will do all this behind the scenes for you. But if you really want full control over what’s going on, you might want to give it a try. You can’t control the DVD player and its resizing algorithms, but you can control everything up to that point. Keep the resizing to a minimum and use a good photoeditor when you do.
But at the end of the day, you’re still limited to the resolution of the TV and (probably) its uncalibrated settings.
-Todd