pim is correct, the 16x9 setting is only for videos, it should also only be used on widescreen displays that are used with a video card that only outputs a 4x3 resolution to stretch the video so that the pixels appear unstretched even though the display resolution is a stretched 4x3 resolution.
Other then that, StreetDeck doesn't have any other concept of widescreen displays. It will stretch everything evenly to your display resolution. THis is a known limitation.
Could this be solved through a custom widescreen skin?
Not album art. You can solve most other aspect ratio problems with a aspect corrected skin though.
Thread closed since the reported issue is not a bug.