Do you mean you want it to look like it's letterboxed, without actually distorting the video? You can do this with the mask feature.
If you double-click the clip on your timeline, the PiP Designer will open up. The right-most tab will allow you pick a shape which acts as a window through which the video is seen. If you uncheck the 'Maintain Aspect Ratio' option, you can adjust the length and width independantly.
This won't distort the video, but it will hide the parts outside of the mask, basically cutting them off.
PowerDirector 10 Ultra
Dell XPS Studio - i7 3.4 GHz / 8 GB RAM / Windows 7 Professional 64-bit