Prism - Adds borders to iPhone videos

[jragan]

I have videos that do not have borders on them. When I run them through Prism, they end up with borders and the iPhone 3G won't stretch them to full-screen like it does other videos (in fact there is no change at all in the video after clicking the expand/shrink button in the ipod video player). I've also verified that the borders are added in the preview window in Prism.

 

I'm using the following settings:

Output Format: MP4

Encoding Settings:
  Video:
  Compressor: MPEG4 (iPhone)
  Average Bitrate: 768
  Minimum Bitrate: 1024
  Audio:
  Compressor: AAC
  Bitrate: 128

Video Output Options:
  Resize Video: [checked]
  Shrink or Enlarge the video to the selected size: [selected]
  Width: 640
  Height: 320

If I uncheck the Resize Video option in the Video Output Options dialog, then the borders go away... but if I'm dealing with a large video, shouldn't I need to be resizing it?