I believe that the issue is the actual content. For some reason, ABC's shows (Lost, Desparate Housewives, etc) are broadcast as widescreen, but are sold as 4:3 in iTunes. Probably because these were the first shows before Apple TV. Maybe Season 4 will be sold as widescreen. The sound is great.

The trailers that Apple has on iTunes are full widescreen and very HD. They look dazzling!

So, to answer your question, widescreen TV not required. Just a TV with component inputs or HDMI is all thats required. Check out the Apple TV Forum at http://discussions.apple.com/category.jspa?categoryID=197

Also there is a site that talks about Apple TV hacks apple (http://www.appletvhacks.net/

Terry