Yeah, it just does it automatically when you set it in the dashboard, right? I also had widescreen on, but it stretches everything out, other than the actual gameplay (in NGB, at least), so I turned it off again. 4:3 is just the way to go with that generation.
Unfortunately, I can tell that my disc drive is about to crap out, which isn't surprising considering the abuse this system's seen over the years. I was planning to just buy a new one. Problem is, I dunno which version number to look for, or when the Xbox hardware saw those revisions. Because don't the 1.6 Xboxes have an issue playing certain games in 480p? Yuck!
That, and I was kinda hoping to get one of the fancy pants limited edition systems, but wanna know whether or not it's "safe" to replace my launch day one with it.
Yep, so long as its on in the dash you're set.
Don't buy a new Xbox, just buy a new drive if that's the path you want to do. No reason to replace everything. Thompson drives are known to be the worst of the bunch (although later ones are decent), philips are middle ground, samsung are considered the best (although they dropped a bit towards the end). The Hitachi-LG drives are good as well, but more limited. There are no fancy firmwares, just unscrew, unplug, and reverse with the new drive. Sure, you could start by cleaning your drive, tweaking the pot, but that is a stopgap fix at best.
My recommendation is to honestly skip out on a DVD drive, and go all out with a modification. Since yours is a launch system, it is easily flashed with a new bios. Pop in a new HDD, and enjoy all the benefits of having everything available a click away. Now it may seem like a lot of work, but it is the best path, and there are still people out there willing to do it for you. A new or used DVD drive may work for a bit, but you'll ultimately run into the same issues no matter the system you get.