When I try to do the above with a custom Geometry setting in Compressor, I get a 1280 x 960 4:3 frame with the original 4:3 DV image stretched to 16x9 letterboxed. Why is this? What should I be doing to get a full frame upscaled 4:3 in DVCPRO HD 720p60?
You need to define "custom" a lot more in detail. 4:3 footage should be pillarboxed, unless you crop it to "16:9" in the geometry tab. And skip making a custom frame size, unless you're confident of marketing your own video format.