1) I can't speak for other brands, but both of my Sony Bravia LCDs do the switching between 4:3 and 16:9 perfectly.
2) No idea. Btw, just because a HDMI connection is in use it doesn't mean the signal has to be HD as well. So it's possible it's just plain old 576i/p.
I wouldn't mind that if it deals with the aspect ratios properly.