So, I have created a few tests with the conclusion that producing avi video with DV encoder under Videopad is buggy.
I have created a simple video containing a single video clip - the source is avi with NTSC DV encoding. When this video is put in Videopad in Video Files tab, it is converted from 720x480 to 640x480, which is actually correct if taking into account the fact that the source pixels are not rectangular.
First, let's start with what works - mp4 encoding.
I set preview to 640x480 and produce mp4 file with the size 640x480. The picture is good, no bars added.
Next I set preview to 720x480 and produce mp4 file with the size 720x480. The bars are added to left and right to pad the picture to 720x480.
Overall, the result is as expected.
Next, avi, DV encoding.
I set preview to 640x480 and produce avi file 640x480. Bars are added left and right, picture stretched vertically.
Further, I set the preview to 720x480 and produce avi file 720x480. Again, bars left and right, picture stretched vertically.
The both avi files are of the same size. So, I run binary file compare. The two avi files are completely identical.
I do not think they should be.
Conclusion: avi DV encoding is faulty.