[Rex Brown] "My question is how to do I render it so it's full frame on 16:9 sets and letterbox on a 4:3?"
You should keep your project at HD 1920x1080 instead of DV 720x480. Then you can render to any aspect you'd like and Vegas will do the letterboxing for you.
What you have done is forced letterboxed video into your project (by placing 16:9 footage into a 4:3 project) and so you can't get full 16:9 anymore.
~jr
http://www.johnrofrano.com
http://www.vasst.com