which is why I see nothing wrong with offering the choice of letterbox on one side of a disc and pan-and-scan on the other.

Or better yet, simply use the built-in features of the DVD format to use the anamorphic widescreen video file as the "source" for the pan-n-scan presentation, offering both formats via a menu selection on the same side of the DVD without compromising the image quality.

This is do-able, and some DVDs do this already. The problem is that many mastering houses don't have the proper equipment, software, or knowledge to master a DVD this way. Hopefully, in time, this will change as the DVD mastering becomes more ingrained as a natural part of the production process of all movies, instead of just an afterthought.