There was an issue with the image engine... it should have been resizing proportionately. If you replace this file with the one I have attached it should correct this issue:
You will have to delete the current .thumbs directory in your upload folder to force it to re-generate existing images.
I would have to understand the context of how you want to use it to give advice on how to use it as a widget. It is likely not directly supported, but it is something I could help with in a premier support ticket.