I've been meaning to reply here for a while (just got back from a 2 week vacation
First, the pics look pretty good. Movies are difficult to get good pictures of, especially in the dark.
As for the black bars on the top and bottom, there are a few things to try. My guess is that you are running S-video and using a widescreen movie. In this scenario, the black bars will get added to the top and bottom as you are seeing. One easy way to fill the screen would be to move the projector further away from the screen. This will make the image larger, and should fill the screen better. The better solution is to get a dvd player that outputs in 480p, 720p, 1080i or 1080p (Blu Ray). Those players will use component video cables or HDMI, and will be the correct aspect ratio (avoiding the black bars).
As far as which dvd player, that's a good question. There are tons of options out there. I've always had great success with Oppo dvd players. I've been looking into one of their Blu Ray players but it's kind of pricey at close to $300 (Oppo BDP-80). But, believe it or not, I can count on one hand the number of customers who have even asked me about Blu Ray, so I don't think you need to rush into Blu Ray, yet. But, I have a feeling it will become more requested in the near future.
I LOVE my projector cart. It still needs a few tweaks, but I'd never go back to the way I used to do it.
When you say "tarp the screen", are you referring to a "ground tarp" for under the screen?