Now for some details...
BackgroundThis issue occurs when the LG TV attempts to play HD (16:9 ratio / wide-screen) content which has been recoded (not recorded... recoded) from DVD media to a mkv, m4v or mp4 video file using a tool like Handbrake. DVD content is always stored as a 720:480 picture which was originally intended for the 4:3 aspect ratio typical on tube TV sets that were most common when DVDs were introduced.
You might be wondering why the picture size is 4:3 when the numeric ratio is 3:2. It doesn't exactly work like that because only the width (720) is a pixel-count resolution. The height or "y" dimension is a scan-line count. Those old tube TVs show scan lines taller than each of the pixel dots across the line, so they're not square... but I digress.
To improve the picture quality, most recent DVDs, especially those with HD TV content, carry a special flag on the video stream that tells the player how to stretch the picture's width to reproduce the original picture size. This allows the picture to be stored on the DVD at the full height, without the wasted "black band" areas. The stored picture is squeezed from side to side to fit within the 4:3 picture ratio so that when the player stretches it back out to 16:9, it looks right again.
The problem with the LG TV (at least the 5500 / 5600 / 5700 models) is that the video player ignores that flag and DOES NOT STRETCH THE PICTURE AS IT SHOULD. As a result, the picture displayed on the LG TV appears squeezed from side to side.
It looks like LG TV owners are just out of luck on this issue. Samsung TVs seem to handle the anamorphic video flag in content just fine. Set top boxes like the WD TV Live also stretch the video to the proper size. It appears to be a problem that only the LG TV, maybe only the 55LW5700, but probably most of the LG TVs that are ironically marketed under the "SMART TV" logo.
Solution(s)Since it doesn't look like LG will ever get this fixed, their TV sets just won't correctly display any video content that is originally from a DVD if the content is in HD / wide screen format. In other words, if the video content is encoded such that it depends on the video player recognizing the anamorphic video flag to properly re-size / stretch the picture, LG's built in player isn't up to the job.
Solution 1 is to just abandon the built in player and buy a set-top streaming box like a WD-TV Live. The HDMI output from a box like that will fill the screen as it should without requiring the source video file (m4v, etc.) to be recoded.
Solution 2 is to recode all the content with the anamorphic flag disabled. This requires some investigation of what the proper size ratio of the picture should be for each DVD and requires manually setting the output picture size in the recoding tool (at least in Handbrake). If you already have a large amount of recoded content that would need to be recoded, this isn't a very attractive option. Recoding video including a physical re-sizing of the picture dimensions is time consuming and requires a great deal more computer processing power than a typical straight-through, frame-by-frame picture transcode.