About the highlights - when they were first released in April of 2009, when you added a highlight, you couldn't pick a single part of the photo, but rather the highlight just centred you on the photo in much the same way that navigating to a photo and pressing the [Enter] key does. It wasn't until almost a year later in March of 2010 that we were able to pick specific portions of a photo for highlights. From what you've said now, it sounds like your highlights were created recently, though.
As to your 16 x 9 photos not fitting inside of a highlight - when you are first creating a highlight you can click and drag the corners of the highlight frame to any size over the photo. In your case, you could either zoom out of the photo or just drag the highlight frame to meet the longest edges of the photo (including the empty space above or below it), and when the highlight is clicked, that zoom level should meet the edges of the viewer.