I've already been able to save a movie file as an iPod video format using the updated QuickTime. It plays backs fine in the latest iTunes. However, not having a video iPod, I can't figure out what happens when 4:3 or 16:9 images are displayed on a video iPod's square screen. Are they letterboxed or does the image park itself at the center of the frame and clip off the sides?

letterbox ;-p