Handbrake questions. Can someone please help me?

I have some .mpg files that I created on a PC long ago. I now would like to convert them to MP4 format so I can put them in iTunes. So far, I've been using Handbrake for my other videos that were recorded in standard sizes with no cropping needed and this has been working well. However, for these videos I'm a little baffled. These videos are odd sized at 352x240 and do have some thin black bars on the left and right sides. So, Handbrake wants to crop the sides which is fine, in fact, preferred. But then it wants to resize the video more than the cropping, leaving it more square. Anyone understand why it's doing this? Can you suggest some custom settings to keep it close to the original size?

Original files:
352x240
MPEG Layer 3, MPEG-1

Handbrake settings using "Normal" presets:
Format: MP4 file
Video Codec: H.264
FPS: Same as source, Variable Framerate
Video Quality: Constant Quality RF: 20
Picture Size: 352x240, Output: 344x240, Anamorphic: 312x240 Strict (huh?)
Picture Cropping: Auto 0/0/2/6
Video Filters: none

Thanks!

Actually, I think it's both. I did a number of test runs here and it is cropping out the thin black bars on either side but it is also changing the size of the video in the output. It doesn't look horrible but it doesn't look like I would expect (same apparent height with just that little width taken out). Instead, it looks like it's been squished at the sides and made taller.