Puzzling. If you're getting stretching, AFAIK, that can only occur if you have 16:9 set in your movie settings and then stretch a 4:3 video out to fit.
Check that your movie settings (key E or File>Settings>Movie) are correct for what you want (I assume ie SD/4:3).
Then, on the timeline, make sure you have a 4:3 "back hole" and that your video fits in it without needing stretching.