OK, turns out i fixed the problem by adjusting settings in the DVD Player .. i had it set to 16:9 .. once i put it back to 4:3 it fill the entire screen properly
Funny thou, when i burn a dvd using win avi i did not have that problem as it seems those settings here burnt into the DVD itself..
I did find something that may fix the problem, you can try it out ...
The solution for this is to import the .avi file into Windows Movie Maker and go into options and select 16:9 and either PAL or NTSC, after doing that save the project file.
Close Windows Movie Maker and then open up Windows DVD Maker and click on 'add files' then add the project file you saved in Windows Movie Maker. This will import the .avi file in 16:9 format.
I have not installed Windows movie Maker as yet hence i cant test it right now..