I don't get any black bars in the HTC photo frame widget.
The picture I am using was taken with the phone, phone was in a vertical position. So perhaps the issues you have are related to the how the photo was taken. It could be trying to scrunch a picture not taken by the phone, or taken in the horizontal position into the frame. Just like a movie with black bars. Hope this makes sense, I am really sick today and my cognation is weak.