Georgie,
Your input was much appreciated. After further testing, the final result is: 720x576, aspect ratio 5:4 with actual video 4:3 in it (black border added on top and bottom), people don't get distorted, deinterlaced, 25fps. Looks nice to me.
Hopefully it will look good to the webmasters too...
thebes,
Yep, got HDV as well, and not expecting any of these nonsense problems with encoding.
What's your niche? Guy getting spanked hard? I don't have any content like that right now, but who knows... perhaps soon.