Your question is not that simple, as looks from the first view. First of all physical resolution of AVCHD files may vary from 720x480 to 1920x1080. Most usual for now is 1440x1080, with aspect ratio 16x9. In fact, I never see another AVCHD files. Real resolution of 1440x1080 is not equal to 16x9, thus decoder (or video renderer) stretch video to 16x9 (1920x1080 for example) during decoding/playback.
iPod Classic may store and play video with resolution up to 640x480, so far there are three ways to transform 1440x1080 at aspect 16x9 to fit iPod compatible resolutions:
1. Simply squeeze source video 2.25 times in horizontal and vertical direction. Resulting physical resolution will be 640x480. Do not forget to set resulting aspect ratio to 16x9, this info will be written in the file header. I'm sure iPod will reproduce it correctly.
2. Make the resulting file with physical resolution of 640x360 (which is real 16x9 aspect). Aspect ratio could be set to 16x9 or 1:1 - square pixel, i.e. guidance to decoder reproduce it in physical resolution.
3. Squeeze original image to 640x360, and put it in the box of 640x480 with black stripes of 60 pixels on top and bottom. Set aspect ratio to 4:3. So, resulting file will be 640x480, but informative screen will be 640x360 (16:9).
I have no either Converter Studio or iPod near me to test above theoretical thoughts, but sure, that all three ways are possible in CS and iPod will work correctly in all three cases.
Generally, the first way is most correct in terms of AVC standard and preserving image quality, but the third one is the most compatible, i.e. any player will reproduce resulting video correctly.
I know couple guys in Elecard who know the exact procedure to encode AVCHD to iPod with correct aspect ratio - Mutek and Nick. I'll push them to spend a few minutes answering to this post.