I work as an Assistant Editor in Manhattan and the whole Window Boxing, Letter Boxing, Anamorphic, SD, HD, Codecs and such with clients is a bit that I go through every now and then as everyone has their own terms for it as there is no standard that everyone uses. And yes what I was calling pillarboxing (left and right side of video has black bars while top and bottom do not) is what I get as well from SD footage. However to my knowledge I don't see how an HDTV can display 4x3 natively without any sort of scaling or cropping as they are a 16x9 resolution and screen. As I have played PS1 and PS2 titles on my PS3 which it displays at 480 however it is in fact pillarboxed. I do not have any experience with an EyeConnect so I can't speak for it, however what you are getting on an HD screen to me seems normal. As when you convert 16:9 to 4:3 you will get cropping or a letterbox around.
I mean if you set your PS3 to 480p only mode for output, what happens? Does it center the screen and pillarbox it or does it give you the full image undistorted not cropped, etc?
Core2Duo E8400 (@ 3.0), 8gigs of Mushkin, Vista Home Premium SP2 64bit, 2.5 TB of Space, Wired to Linksys WRT54G wired to 80GB MGS4 PS3 on Sharp 32" 720p LCD TV