If you have it... use CS4 media encoder instead.
CS5 Media Encoder is a rather crappy piece of software compared to it's older brother. It's the only reason I keep CS4 installed side by side.
General notice: from now on, I would like to ask everyone to put [AS2] or [AS3] (corresponding to the version of actionscript you are using on your project) in front of their post titles when the question is actionscript related! Please help us help you faster. Thank you.
But i did just find the solution....seems in their wisdom, SAdobe decided to remove the Aspect ratio options from the settings window to file/interpret footage instead. In here, i can set the aspect correctly and the video all looks right again.
Video Editor/Audio Mixer/ Compositor/Motion GFX/Barista
Character Options Ltd