The films are in their native active ratio but 720p content will have to be downsized to fit on the 1136x640 screen so it won't be in its native resolution.
Remaining with 640 pixels width helps the developers but hinders the quality of the video, even if its only marginal.
I wonder if Apple will add a 720p screen to the next iteration.
Does it really hinder the quality? I mean in a way that's visible to the human eye? I've watched some widescreen video on my iPhone 5 and it looks amazing - certainly as good as it looks on my iPad (3rd Gen) or my Macbook Pro. Sure, full 720p may be the native resolution but on a screen this small at such high PPI, does it really matter?