Ellis your Demul screenshot is identical to the remaster screenshot in term of ratio:
http:///kSKc.png
You just don't get it right.
SEGA engineers knew their hardware, hence why the game was developped with black bars, so that once it was displayed on CRT, it wouldn't feature black bars. This is why the watch is oval, to be round once displayed. You truly believe they meant the watch to be oval ???
They meant it to be round, so they made it to be oval so that once it'd be displayed on a CRT TV, it'd become round.
You just lack the knowledge to know the difference between the internal image, which has black bars when DC process it and the output image, which is the final result and how the game has to look.