Making a PAL DVD but getting unwanted pillarbox

I'm kind of new to Encore and I'm having trouble with a PAL DVD. My source is a 720x576 letterboxed m2v PAL file. The problem is when I bring it into Encore, Encore is also pillarboxing it so that it has black around the entire file. The source is not pillarboxed. How can I fix this?

A little detail about the project. It's a simple first play PAL DVD with one m2v video asset. No menu. I have the project settings set to:
Authoring mode: DVD
Television Standard: PAL
Transcode Settings: Codec: MPEG-2; Dimensions 720x576; Frame Rate: 25; Fields: Lower Field First; Audio Transcoding Scheme: Dolby Digital; Maximum Audio/Video Bitrate: 9.4 Mbps


Thanks for any help.