No, this isn't a flaw, just a little-known issue when working with digital video.
When you shoot in DV you are capturing video that is wider than the standard TV ratio (DV is 720x480 while a TV is closer to 640x480), so whenever you view your iMovie projects on a TV you will lose some some off the edge.
To help with this Apple included the 'TV Viewable' indicators, but these aren't just for menus and text. Anything that falls outside these areas will be off screen when displayed on a TV. That's just the nature of the beast.
My numbers might be a little off on this so someone correct me if I'm wrong.