mua, thanks for all your help. I didn't know that these blacks borders won't appear on tv. I didn't want them there since I watch movies I encode on both my tv and pc. I think I fixed the problem by just clipping the black out and everythings seems to be there still when compared to the original source. I actually went and changed the aspect to 480x480 with the kvcd3 template. same quality. no more borders. I guess I just needed to test out some more. all this seemed confusing at first but it's starting to make alot more sense now. Been reading all up and down these forums for 2 days straight.
once again thanks for all your help.