The built in player is NOT mediaplayer classic, it's WMP. So you'll need to not use the built in player then follow this. It's in the RR FAQ
Can anyone help, I've just re-installed windows and the latest RR on my carputer and now when I use the video player, using the built in player it plays with a black strip top and bottom, if I run mediaplayer classic out of RR I can get it to fit to screen but not in RR.
I'm sure I had it doing this before but can't seem to get it working
First verify if you're using MPC or the Built-in player.
Second, verify if you have the "NOZOOM" option selected in RRConfig -- if you have it set, then RR will fit the video according to your resolution and screen aspect ratio setting to fit the video's aspect ratio. If the nozoom isn't set then you should just press the zoom button a few times till you have the video with the desired size.
The video/dvd playback of RR is being highly improved for the July release... so this may be a temp thing for you..