Because the Wii does not have HD capability, you're going to want to use fullscreen. It will fill up the whole screen, and the miis or whatever it is won't look fat.
i preffer full screen because you get the whole picture... me personally i just hate the black lines that make the tops, and bottom ugh i don't even know what i just don't like it so full screen all the way
The picture will not be letterboxed (have black bars) on a widescreen TV. I honestly think the overall picture for anything (not just the Wii) looks better on an LCD or Plasma screen than it does on a CRT TV. I have it on a CRT tv right now and it works great, and my friends who have Wiis have them on a Widescreen and it works great. Really your choice of TV, works great on both.