It is called masking, however, horizontal masking is more difficult than masking the sides. You can use curtains or some other DIY method. For example, if you have a 16:9 screen AND projector, when you watch 4:3 material you just draw in the curtains on the sides to blacken the light your talking about.
The overscan problem is probably related to the projector not being a native 720p or higher unit. If he had a 16:9 projector, he would have less issues.
Spend some time at Projector Central DOT COM and you'll find all your answers. If HD is something your interested in, then I would get a 1280 x 720 unit. DLP is not always the best.
