I have not tried composite yet. Regarding the black border I have not encountered this, the default resolution for Dgen/Picodrive is 640×480 and your tv should switch resolutions when you start the emulator unless you specify otherwise in es_systems.cfg.

What resolution is Emulation Station displaying on your tv? You can specify resolutions by editing /boot/config.txt, more info here: http://elinux.org/RPiconfig.