I like to convert all my videos that I watch on my iPad (and I watch a lot) to the native screen resolution of the iPad. I hate seeing those black bars and it looks much more impressive when viewed in full screen. I also don't notice any squeezing when viewed on the iPad, so what are your reasons for keeping videos at its original resolution?
Native resolution (640x368):
iPad Resolution (512x384):
Native resolution (640x368):

iPad Resolution (512x384):
