To avoid the "Letterbox" effect in VEGAS, keep the following in mind:

1. Remember to always adjust your project settings to fit the media you wish to render.  To do this, select "Properties" from the "File" (or "Project") menu.
2. Select an appropriate template.
   If you aren't sure which template to choose, click the "Match Media Settings" button (the one with the folder icon in the upper right-hand corner of the "Properties" dialog). Browse to a new one of your source video files and select "Open". The software will then automatically select the appropriate template for you.
3. Next, click "OK".

If the aforementioned settings should be changed in an existing project, the preview settings for the project should also be changed. 

1. To do this, click on the "Event Pan/Crop" button on the first track of your project.
2. Click the right mouse button on the image and select the setting "Match Output Aspect".
3. Close the "Event Pan/Crop" window.
4. Right-click on the first track of the timeline and select "Copy".
5. Select all of the events within the timeline, right click and select "Paste Event Attributes".

Now, all of the clips will be display with the selected settings.