Hi kvcdman,
In short, you need borders to keep the correct aspect ratio of the movie.
Only if your movie is "full screen", you don't need borders (actually you do, if you want to conserve movie area. More follows).
If you look at the film pixel area of a movie, the actual area that contains information, it usually is a reduced area compared to the area of your TV.
So for example a wide screen picture, 720X480 would be the full screen area, but the actual film pixels could be 720x360
Because DVD specifications do not allow that as a resolution, it would be incorrect to encode your output size as that.
Only DivX players or such allow for "borderless" films, because the players internally add the black borders.
This can't be done with MPEG-1 or MPEG2, when targetting SAPs.
So, basically, we need black borders
And as for full screen movies, you CAN encode with TV "blocks" overscan, which really encode your picture in a reduced way, so when your TV player expands the movie to full screen, it will flush the edges of the screen with your movie. Normally, there would be picture area that you would loose outside the vieweable TV area. Search the forum for "overscan", and you'll find a lot of explanations on the subject
If you want a more technical answer, with heavy details, I'm sure "Incredible" will give you the full answer as he's the PARanoia guru, and he had to digest all information here:
http://www.uwasa.fi/~f76998/video/conversion
-kwag