A 720-wide frame is entirely normal and expected; there may be only 640 active pixels, but the standard frame shape has been 3:2 (not 16:9) for SD and ED content for a very long time. It’s DTV, not VGA. Read up on 480i and 480p.
It’s also not unusual for TVs to not accept 240p over HDMI, as it’s not exactly an accepted standard video mode as far as manufacturers go. It’s interesting that your TV even bothers accepting that kind of signal over HDMI, but that it would interpret it as 480i (and it probably tries to deinterlace it, too) is not unexpected, as it’s an abuse of 480i (uses only the even or odd field to display content; I forget which).
If you have a non-CRT display that actually supports 240p over HDMI, or any other inputs, consider yourself lucky. This is the entire point of the OSSC; why pass-through 240p? Line-double it to 480p.