A very cool mockup. However, thankfully I doubt there will be "letter boxed" applications. When building iOS applications its always best never to rely on the viewport size being a fixed size. To aid in flexible viewports there are the UIAutoresizingMask options for UIViews that adds struts and springs to elements so they can stretch and move with viewport changes.
When you rotate a device and the app moves about that's the UIAutoresizingMask options in action.
Sure, there will be applications that dont work properly. That will just force the developers to properly implement flexible viewport settings so in future it wont happen again.