We ran into the same problem with their Angular theme. They're using WP's oEmbed, which will let you add a max width and height (http://codex.wordpress.org/Embeds#Okay.2C_So_What_Sites_Can_I_Embed_From.3F). So, you can try updating line 268 of helper-slideshow.php to [embed width="123" height="456"]...[/embed]. We tried it but it's not yet working.
So for those of you who like duct-tape, open /css/slideshow.css, comment out height:340px and add a max-height: to whatever you need to get rid of the letter-box. We used 401px for super-widescreen video aspect ratios (given that the max-width is 930px).
element style. I'll let the Kriesi guys figure out where that is.