Is there any precedent ?
There are 11 other games with windowboxed cut-scenes, which were considered blemishes.
Civilization
Civilization II
Dungeon Siege II
Marvel: Ultimate Alliance
Planescape: Torment
Sid Meier's Alien Crossfire
SimCity 4
Sins of a Solar Empire
Splinter Cell
Ultima VII
Vampire: The Masquerade - Redemption
Sure, the devs clearly screwed up as there's not a single AR in which this sequence looks "right" (no black bars)
It looks right in 4:3 to me. The pillarboxing there seems to be intentional. And the letterboxing is necessary in order for the intentional pillarboxing to work. There's no reason, however, for 16:10/16:9 to have more pillarboxing than 4:3 does. And therefore, no reason that the letterboxing should remain constant.
They then faded out the corners to black so it purposely looked like tunnel vision for the dream,
That's probably the best way they could have achieved tunnel vision on 4:3. A better way to achieve it on widescreen, though, is to just use pillarboxing, the way I demonstrated.