Does not remove letterboxing in Shenmue 2.
Cutscenes are limited to 4:3 by default. By editing the game's executables, they can be forced to render in 16:9 instead.
Multiple ways of doing this can be found here
Shenmue I and II - 16:9 Widescreen patch has fullscreen cutscenes without black bars support in Shenmue 2.