Yeah it is definitely a FoV issue. Fired up WoW and I get the same thing. After playing with NVSurround for a few days I notice this in other games. FEAR2 for example, the NPCs in peripheral view appear stretched out as well. Maybe someone here can explain on a more technical level why this happens but I would postulate that its due to current graphics engines being designed for standard resolutions as opposed to extreme widescreen.
For me personally, not a huge issue. I think the benefit of the added visual area outweighs the quirkiness/distortion.