xbox 360 and hdtv

So my brother and I blew some major cash yesterday. The allure of Oblivion on the 360 was too much. Anyway, we got a 27" Samsung HDTV (don't have the model name on hand) for a really good price ($350) and the 360 Premium bundle with the extra controller and PGR3 (gonna trade it in for Oblivion).

Standard aspect ratio on the Samsung display (did I mention it's CRT?) is 4:3, with the ability to 16:9 it. Now since standard resolution on the 360 is 1280x720 (720p), would playing a game like Oblivion at 720p at a 4:3 aspect ratio stretch the image? I played some PGR3 yesterday like this and the game looked fine, but I can't really tell if the 360 upscales the image thus pixelating it more. Should I just set my TV to widescreen (with the bars on top) to comply with the 720p resolution of the 360?

I don't know as much about HDTV (mainly due to not owning one), but I would expect that 16:9 is what you want for 720p, since that is the assumed aspect ratio for HDTV. The 4:3 may look ok, but you TV is probably using pan and scan to truncate some of the image to maintain the correct aspect ratio while in 4:3.

Hmm, that's what I was assuming. Thanks. :)