Update: Video scaling/fitting control now available.
What you're seeing is that the frame dimensions don't match the aspect ratio of the video, and the video is maintaining it's original proportions.
I'm working on a way to control this more in an upcoming version.
To remove the black borders ("letterboxes") you can change the size of the video object to match the aspect ratio of the video.
It is also possible to crop the video. To do so, use Edit > Cut on the video container, draw a new rectangular frame, then choose Edit > Paste into. You can then scale the outer frame as desired to crop the video.