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For the YCrCb option, HDMI supports both RGB and YCrCb video encoding. For your adapter however, you wouldn't see a single difference so that won't matter really. It'll make a difference however on large flat panel TV's, but I usually recommend sticking with RGB.
For the other question, I don't think you can adjust that in the converter. They don't really do those kinds of things.. They just paint the picture exactly as it comes in, no adjustments. It might be more feasible to see if the AppleTV itself can be modified to have 4:3 output.
I want to say that, some AV receivers that had HDMI ports like my Pioneer, CAN in fact modify the picture coming in via HDMI, and then send out an HDMI signal that modified with different height and width, but that'd be an even more clunky setup. (At least you could get surround sound though.)
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