Is this just a bandwidth/compromise issue?
I have had problems/difficulties/issues with getting equipment to use the full screen when the file is not encoded to 720 width.
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Many people use programs like AutoGK and specify a particular file size. Such programs adjust the resolution in order to deliver adequate quality at that file size. Because, in general, smaller frames require less bitrate. This is a compromise: you are trading off resolution to prevent blocky artifacts.
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And hopefully the end user has the ability to zoom to full-screen.
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Mostly, it would have been a "burn it to a single CD" issue, or a bandwidth one..... if you're referring to pirated video.
I'll confess I don't recall ever having a problem running video full screen, even back in the days of using an AVI capable DVD player and a CRT TV, and I've got a few very old AVI/Xvid encodes with widths of around 350 or less.