Thanks John, does this mean that the widescreen LCD is sort of "just
for show"?

If the buttons are on the side of the LCD then it's a 4:3 LCD. To fit a
16:9 LCD Sony put the buttons on the bottom. The 35E is a 4:3 camcorder with
a 4:3 LCD.

I must admit I haven't had too much opportunity recently to
get to grips with using to camcorder/software etc - which means I have
not had much trial and error going on. If I keep my selections as 4.3
and use the PC to edit in 16.9 will this work if I select 16.9 in
adobe elements 3.0? Is there a "hard and fast" rule here?

To create Widescreen from a 4:3 Letterbox requires scaling. There are all
kinds of ways this can be done. It dosn't follow letting the camcorder do it
will be better than doing it using editing software, and differnt editors
will use different algorthms.

If you record in 4:3 you won't be worse off. This image will contain the 432
lines the camcorder would have used to generate Widescreen.

If you set up your editor to generate widescreen you will get a widescreen
editing screen. Your 4:3 video will fit in the middle, with black columns
either side. You will have to apply a widescreen pan/scan filter to extract
a 16:9 image from the 4:3.