Kim,
If you are using Photo Studio they have to be a specific jpg format that includes color formatting (even if they are black and whites) so good luck that whoever is sending them to you does them in a way compatible with the MS system.
If you are using Pro Show Gold or Producer, any format is compatible.
I prefer the MS editing platform in general over PC editing, but no one editing platform is the best for all things and photo manipulation is one of the ones where the software that MS supplies really falls down compared to the competition.
For doing a lot of photos the choice between Photo Studio versus Pro Show Gold is like the choice between digging a hole in the ground for a basement with a trowel and a shovel.
Photo Studio would be the trowel, Pro Show the shovel, either can do the job, but I know which one I would and always have picked and it ain't the trowel.
Of course, if you have no choice, but to do all your editing in your MS editor, Photo Studio is the choice.
As for the 4:3 and/or 16:9 part, with Pro Show you can create your product in either and then switch over to the other and easily tweak how any photos appear and create it that way as well.
You can even include both on one DVD with Pro Show.
I can't answer for Photo Studio regarding this issue other to know if it's do-able it will be far more tedious and klutzy like everything in that program compared to Pro Show.
PS - If you are going to want to add movement and zoom into some of the photos you need decent resolution (more so with Photo Studio).