A different projection matrix is exactly the right way to do it. The evidence suggests that they used the wrong projection matrix, though, one that keeps the left-to-right distance the same and shrinks the top-to-bottom.
I agree that people are blowing this way out of proportion, but it's wrong to say that this has no effect on gameplay. Now, no one is playing Bioshock deathmatches, so it's not like widescreen players are at a disadvantage competitively, but the truth is, your field of view affects the way you perceive the game. The default FOV of 75 degrees is already zoomed-in somewhat compared to many first-person games which use 90 degrees. Zooming in even more could give a rather exaggerated, unnatural feel to the game, especially if you're viewing it on a large screen.
I am also not surprised to hear reports of motion sickness. Subjecting yourself to an unnatural field of view is a surefire way to experience motion sickness. I would suggest to anyone having this problem to sit farther away from your screen, which will lessen the zoomed-in feel.
