There are two ways and neither is good. 1) Crop the sides off. 2) Stretch it. Much better to watch it the way it was intended.
This app handles .avi quite well. I've used it to stretch video with good results. http://www.deskshare.com/Resources/articles/vem_videodim_aspect_dvd.aspx
You can use CCE SP to convert the widescreen to a "standard" using the telecine "panscan" feature under "advanced" tab, you can also convert the 16:9 widescreen aspect ratio to the standard 4:3 aspect ratio