CCE does not have a resize or output selection option. Therefore, your input to CCE has to have the proper aspect ratio and resolution. You can either achieve that by resizing the AVI using AviSynth, frameserve it via VirtualDub, or using the AVI2SVCD part in DVD2SVCD, which should correct the aspect ratio provided that your AVI has the proper aspect ratio (otherwise, you'll have to edit the avisynth script manually before encoding).