To whom does the term "they" refer?. The broadcaster does just that for his SD channels in most instances (although it is letterboxed). The BDU doesn't do that because the material on the SD channel can be different from the material on the HD channel, so the BDU provides an HD channel if they are fed an HD channel. If they are fed an SD channel, they will send you that SD signal, unaltered. Although some SD channels (Deutsche Welle) on Rogers can be converted by some Rogers STBs to full screen widescreen (no bars), this is not done a lot due to the fact that it saves little bandwidth and the fact that legacy equipment may have issues with handling this.Do you mean that they can't even take a 16:9 HD signal and convert it to a 16:9 SD signal?
Many people also don't want their screens "forced" into 16:9 fullscreen because the original picture quality is often not that great with an SD channel. People would prefer the smaller (16:9 letterboxed) image and have the option to zoom the image on their end if they want, either with their TV or STB's zoom function. This way the people who want to fill their TVs with an SD signal can and those who don't can leave it the way it is. If the BDU or the broadcaster fills their screen, there is typically no way to "unzoom".