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No I’m not confused at all. It’s from personal experience.

I posted this before, but I’ll tell the story again.
We have a 52” LCD HD tv. A brand new DVD player (kids fried the old one) that has an up-converting feature to 1080i and an even newer PS3.

We went to Blockbuster on the day that “27 Dresses” was released. The girl there could not find the Blu-ray so we got the DVD. We put the DVD into the player and put on the subtitles for the “Benny and the Jets” sequence. The words were in the black of the letterbox.

The girl from Blockbuster called and said she found the Blu-ray. We got it and played the same sequence again. The words were in the picuture. The black frames were significantly smaller. Give it a shot with a movie in both DVD and Blu-ray. You’ll see.

First of all, you are talking about one movie. I do not have a Blu-ray, but I have a HD DVD. I have several titles on both formats, and have not seen the problem you describe. Is it possible that your 27 Dresses DVD was in fullscreen?

The only time I have seen the subtitle issue you describe is on a nonanamorphic DVD. On nonanamorhic DVDs, the picture is in a sort of box (maybe the larger bars and squishing to which you referred? I know 27 dresses was released on DVD in both widescreen and fullscreen.). You then have to use the zoom function of either your TV or player to make it fill up the screen of your HDTV. However, when you do this, the subtitles "fall off" the picture and reside below the picture and are no longer readable.

Seriously, I post at several home theater forums, and the problem you describe (a difference betwween the way BR and DVD project images) has never come up.