In iMovie HD 5.0, you should be aware of unusual things that can happen when mixing clips with different aspect ratios within the same project. One thing that can happen is when you import a clip that has a different aspect ratio than the project you're bringing it into and then apply certain effects (such as Fog), the effect will also render over the black bars outside of the video image in the frame.
In the following example, we imported a DV widescreen clip into a standard DV project (4:3 aspect ratio) and added the Fog effect. Note how the Fog appears over the entire frame and not just the image:
As a workaround, you can create a new iMovie HD project in the same aspect ratio as the clip in question, import the clip, apply the effect, and export the rendered clip as a movie. Then import the revamped clip into your original project. You can also cut and paste between projects.