It looks like the footage might not be interpreted correctly. Check the Pixel Aspect Ratio on the event properties and make sure that it is set to 1.2121 which is the PAR for NTSC DV Widescreen.
> it only happens when I SAVE AS and the entire video timeline turns into a squeeze image.
That doesn’t make sense. You use Save As and the project that gets saved is no longer 16:9? What version of Vegas? Are you using the Copy media with project option? I don’t understand how saving a project can change it’s aspect (but I guess that’s why you posted) 😉 very strange indeed.