When I turn on widescreen on my 4:3 TV, the MS Dash imeddiatly gets tall and narrow. This is with an S-Video cable connection (i.e. not component, not HDTV). You are using a single RCA connection but it should work the same as S-Video.
Are you sure your TV aspect ratio isn't set to "auto zoom" or something. Do This, change your TV's setting to 4:3 (you should have vertical bars on the left and right sides). Then make the widescreen change in your XBOX and see if your dash gets "narrower" after the change in the XBOX.