I had that problem with the original release of Office Space. It would work fine with my regular DVD player (when I had it), but I found it to be a problem with the upconversion. When I changed the upconversion settings the picture would stretch horizontally, but the bars on top and bottom would still be there. I have mine connected through a Denon receiver, but have not tried the PS3 connected directly to the TV.
I have Good Will Hunting, too, is your copy some type of special edition? I can try my copy, too, and see what happens.
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