Does the image look in proportion in both cases other than the size of the bars? i.e. Do people in the film look squashed or stretched in either case? It sounds like the aspect ratio controls are set differently for the different inputs. If the bars are smaller using HDMI but the image is otherwise undistorted in both cases, then it sounds like the TV is set to "zoom in" with the HDMI source in an attempt to fill the screen, but presumably you're losing some of the picture at the sides. This assumes that the film is in a wider aspect ratio than the TV (2.35:1 for example). You probably want to try to turn that off so you're not missing out on the whole picture (unless you prefer it like that).
If the image is squashed as well as having bigger black bars in the case with the DVD player, but correct proportions with HD-DVD, then the problem is different: the TV is incorrectly changing the aspect ratio of the composite input.
Usacomp2k3 is right, though: composite is horrible. If you want to keep using the DVD player for some reason, go for a better quality connection standard. HDMI > component > s-video > composite. But given that HD-DVD players reportedly have good quality scalers, it would seem to make more sense to use that for DVD as well.
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