Just use avisynth and add borders to it and then frameserve to virtualdub.
If you do not know how to do it read the avisynth manual, look for addborders.
In virtualdub choose "fast recompress" and chose a codec, i.e. xvid.
In case of xvid you can either do a 2 pass, fixed bitrate or
use the fix quantizer option, hint use the inbuild calculator.
http://www.avisynth.org