The 16:9 mode in all consumer/prosumer cameras works like this: The camera captures 4:3 image. It crops the image to 16:9 and then stretches it to fill the 4:3 image. The camera then compresses the image and puts it to tape.(posted 7747 days ago)You have a few options if you want a 16:9 image.
1. You can shoot in normal 4:3 and crop it in post. The problem with this mode is that you can't see, in real time, how this will look.
2. You go with the 16:9 option in the camera. Some argue this is a slightly better option then cropping because the camera compresses the image after it's been cropped and stretched.
3. You could buy a conversion lens ($600-1500) which stretches the image optically. As far a quality, this is the best option and it's the only true 16:9 aspect a prosumer/consumer camera has. If you intend to convert your DV footage to film, a Widescreen Adapter lens should be your only option. The difference in quality is tremendous. The only issue I've seen with this option is slight distortion around the edges.
Between options 1 and 2 you should probably shoot simular footage and compare the two to see for yourself. The camera's 16:9 option is definitely more convenient but the look you want may be just cropping in post.
Incidently, if your shooting with a consumer grade camera ( think 1 CCD ) you might not be able to find a Widescreen Adapter lens that will fit your camera.