I have an O2 as well with a 1600SW. I used videoin with S-Video to play my dreamcast. I, too, was scrambling trying to figure out how to have the whole screen filled. Unfortunately, the 1600SW only does one resolution, so I was stuck. What I suggest you do is change the resolution of your screen to 640x480 and then use videoin if you have a CRT. I forget the change-resolution command, but, I'm sure you can google it.
Also there's a program called BigVideoIn you can compile. It's on the examples CD. It works 'OK'. Pretty big lag. It's also hard to find the exact width/height to fit your screen and it has a pretty nasty border. I might want to hack it up one of these days.
Bottom line: Get a TV. They're cheap!