I have attached a screenshot of what I get when I add video. The video is played in 16:9 popup with black bars.

Note I use a self-hosted video, not Youtube. Due to GDPR in my country and the cookie plugin I use, I think the video will get blocked for many users who decline cookies — so I would prefer to use self hosted video only.

Regarding video options, is this a new feature? I have not yet updated to new version. I do not see this option on product page, see screenshot.

WP admin details below.