There’s nothing in the NTSC or PAL signal about the aspect ratio, so yes a signal with 16:9 image works fine.
Here’s a thread where I talked about how to add a black (dark gray really) bar at the bottom of the screen using a MOSFET.
http://nootropicdesign.com/forum/viewtopic.php?f=25&t=2363
I used the MOSFET (also works with a 4066 analog switch) to turn the picture “off” to make a black bar, and then overlayed text onto it.
Problem is, the bar is only as wide as the frame buffer you have defined (e.g. 128×96) so it doesn’t go all the way across the screen. You can try a wider resolution to see if you can make the bar wider.
Hope this helps.