Eliminating overscan area of an avi when converting to mpeg, mov etc?

The safe areas are for titles (inner safe area) and action (outer safe area). The action safe area is probably the closest to the overscan area that you are refering to, but I'm not exactly sure what you want to do with it.

Do you want to hide everything out side this area ?
Do you want to have the overlays rendered in your output ?
Do you want to crop off the outer area ?

Can you clarify your request, or provide a diagram ?

Is there are reason you want to do this ?

There are two ways to do this in Vegas.

Method One : Recommended if you only have a few clips, as it must be done to each clip.

1. Select the Event Pan/Crop for the clip (symbol top right hand corner of the clip)
2. Under source, set Stretch to Fill Frame to 'NO'
3. Drag corner in until border fills reaches action safe frame edge.

Method Two : Recommeded for larger projects as it is independent of number of clips.

1. Create a new video track at the top of the stack
2. From the Media Generators presets drag a black solid colour to this video track. Drag the right hand end out to the full project length. Note : At this point your preview window will be black - don't panic.
3. Click on Event FX for the black clip, and select cookie cutter.
4. Use the following settings

Shape : Rectangle
Method : Cut away section
Feather and Border : 0.00
Repeat X and Repeat Y : 1
Size : whatever is required to reveal enough video. For PAL 4:3, 0.440 reveals to the action safe frame
Centre X and Centre Y : 0.500

Your preview should now show your video with a black border around it.

Looking at your still, there is another reason. Look at the image tearing at the bottom of the screen. When you encode, this will eat precious bitrate. Adding the border eliminates this extraneous noise and puts the bitrate back where it belongs.