When you encode a DVD source (720x480) and use strict or loose setting with a width of 720, you should end up with a video that is stored at 720x480 (the original resolution of the DVD, or 720x352 if you cropped off the unnecessary black bars), but the video is stretched on playback to display at 853x480 (or 853x352 if you cropped of the aforementioned black bars).
To see the videos true resolution, use a program like Mediainfo. You should see that it's 720x480. This is exactly how a DVD plays videos back. Essentially, it's stored in one resolution but displayed at another.