You shouldn't have to deal with black bars or stretching, based on this from Gamespot.
The system allows you to set your display resolution and aspect ratio depending on the type of video cables you use. VGA cables will give you six different resolution options: 640x480, 848x480, 1024x768, 1280x720, 1280x768, and 1360x768. Component cables will give you 480p, 720p, and 1080i resolution choices. Games are actually rendered internally at 720p, and the ATI video engine scales the video up or down to the desired resolution.
I've seen a 360 screenshot with 1280x1024 as an option too. At least you could get 1024x768 which is a descent high res 4:3 aspect image.