Why not just move the radar and player data off the viewable area in the letter box view?

That would solve the black issue and it won't be obvious to the player that their be punished by a 4/3 aspect ratio display.

Ok I can't resist saying this,

"Think outside the box". The letterbox that is lol!

Another thing you could put in the black area is a chat window. Although as some previous mentioned you could also slowly adjust the coloring so the huds outside the letterbox don't have to high of a brightness to distract the player from the in game lighting.

Returning to the main point of the thread, I think Erik Rufelt and Krohm nailed it. A game with a competition aspect needs fixed aspect ratio to ensure fairness. Where it fits, by all means include another optional mode which fills the screen (and is designed to be either equal or inferior to "the" ratio in every aspect of doing well at the game).

I think most of the criticism against letterboxing is unfounded. People don't complain about it in movies.

Now, how exactly to choose the fixed aspect ratio?

The thing that comes to mind would be to pick the ratio the majority of your users have, which is not unreasonable. But it is better to think of some other things as well. Considering the current state of display technology, if I predict 7/10 of my users will have 4:3 displays and 3/10 will have 16:10, I'd likely still make 16:10 the fixed ratio. The superior screens on the market (size, IQ, etc.) are 16:10. Because of that, the users who care about optimal presentation and/or control already tend to have 16:10, or will switch to it. To set the game to use 4:3 ratio will result in a good bit of antipathy from the widescreen folk. Proportionally far fewer people with 4:3 are going notice or care about the results of setting the game to 16:10. Going the other way would also potentially put people in the silly situation where they have to downgrade their hardware overall if they want an optimal experience with your game. Obviously, if there were displays that are better than ones available in 16:10, they would still have to be common enough to warrant ending up as the fixed ratio.