4:3 footage to 1:9

The quality of the scaler/ARC that is being used is the key part.

There are scalers and scalers. And then their are scalers.
See a Quantel iQ upscale an SD picture to HD and you will be amazed. See an LCD TV scale an HD signal to 1366xwhatever and you will be appalled. There's the Teranex type of hardware converters, as well as the small AJA boxes.
Then their are software scaling techniques, all of which differ in approach and result. Just recently, in 3.5, Avid changed their 2D scaling algorithm. Besides that, their 3D effects have a HQ mode, which uses yet another type of software scaling. If you use Boris UpRez, that can offer you another 5 or so upscaling types. Or other 3rd party solutions.
So if you are talking about converting aspect ratio on footage, you will be dealing with scalers, either scaling horizontally, vertically, or a mix of the two. The result is heavily depending on the quality of the scaler that is being used.

"Just recently, in 3.5, Avid changed their 2D scaling algorithm"

So, does that mean there is something in the avid software that will do this or is it a hardware thing?