I think it is high time I gave something back to all the wonderfully giving people on this forum, so I made this little tutorial about what to do if a portrait oriented smartphone video finds itself in an editing job you are doing.
Hopefully this has never happened to you and never will, but just in case, this might help!
Also, if you are editing lots of iPhone or iPad .mov files, make sure you transcode them to a more Vegas friendly file type otherwise you will run in to awful glitch problems after you use 1 gigabyte of footage.
Hey Ryan that was a great tutorial. Thanks for sharing it.
Since you asked for "better ideas", what most people in the industry do is zoom instead of stretching (which looks unnatural). In Vegas Pro just open Pan/Crop on the bottom video, right-click on it and choose Match Aspect Output. This actually zooms the video in proportion to fill the sides so that the color scheme matches the original video but you can't really see the actions so it's not as distracting after you add the Gaussian Blur. There is even a 3rd party plug-in in FXFactory for FCP X that does this. It's a popular solution. Try it and see.