Any movie in iTunes can be played full screen. Remember that widescreen movies come in a variety of ratios so they will most likely have black bars at the top and bottom but it will be the full width of the screen.
4:3 movies will have bars on right and left to maintain the aspect ratio.
The iTunes movies look pretty good, not quite as clear as a DVD but a massive improvement over what they used to look like when they were 320x240.