Thanks John & Mike –
1. You can tell I am not very experience with Vegas, right? Anyway, I didn’t get at first the meaning of pixel aspect ratio. Normally aspect ratio is used for the entire frame, not a single pixel. Of course it needs to be 1. Thanks for that.
2. I am also new on COW and have uploaded the image too quickly, thinking it doesn’t show until my post gets approved, skipping the embedding step as instructed at the bottom.
3. Apart from pixel aspect ratio of 1, I have tried everything suggested (after reading many many threads) to no avail. The “Track Motion…” button on the track’s control panel (see attachment) eventually did the trick.

So, if anybody else comes to this post discussion – here is another object to pay attention to. My thanks to Eran Vered for this.
The frame size looks good now both on preview and rendered file.
However, I am stuck with another issue: it renders only the first 16 seconds (out of 4 minutes). Any idea?