When they telecined (scanned) the film for the masters, they did it separately for widescreen and pan and scan.
For P&S they therefore use the full vertical resolution.
For widescreen, it is scanned only to fit the width, the unused area is just stored as black.
So, there IS NOT a full-resolution widescreen transfer which is then selectively cropped to P&S, or scaled down for letterbox. (Indeed scaling was something avoided in those days I think). The master resolution is exactly the same as the output, i.e. the same as laserdisc for letterbox widescreen. The ONLY benefit we get is that we don't suffer the loss of signal in storing and reading to/from the laserdisc format.
Actually that could be a significant benefit in some cases, because laserdisc players CAN be quite poor at getting the original signal back. However with state of the art player like an X0, I think it is pretty close. It's possible there is less noise (especially in colour signal) but the main limitation of the X0 output is the resolution of the format, rather than the signal-to-noise ratio.
At least that's how I see it.