Weird TV screen size when playing PSX games

[Billabong2020]

Whenever I play PSX games on the PS2 console, there's a black margin at the bottom almost a quarter the size of the TV screen, with the picture frame squeezed to wide-screen size.

I've already checked the configurations, and the screen was set to FULL.

This, however, only affects PSX games, as the PS2 games work fine at full screen.

FYI, I have a New Zealand PAL pre-modded SCPH39002 (Ver.7) PS2, fitted with a no-swap Neo 2 modchip... or a Magic 2. I'm not sure, but it seems to be a NEO since I had to hold the reset button for a certain period of time to switch between playing PSX, PS2, and DVD's. The video signal system for my TV is PAL, NTSC 3.58MHz, NTSC 4.43MHz.

Does this have anything to do this the PAL/NTSC problems, or is it because I am in the wrong "modchip" mode? (Confession: In my haste, I'd forgotten to ask the shopkeeper how to switch modes -- my bad. I basically hold the reset button until either the PSX or PS2 logo appears when switching modes, before letting go.
There seems to be some different modes for Original/PSX/PS2/DVD/CD, depending on how long one holds down the reset button. I read this from an online manual for a neo 2.2 modchip. Not sure if mine is a Neo, though.)

Please help!