The preview images are always stretched to fit the preview area. This won't affect the final movie.
Here is one way to morph sequence with 4 images A,B,C,D:
First do a morph from A->B, then replace image A with image C and do a morph C->B by moving the lines in the C image. Play the C->B movie backwards by clicking "Reverse" in the movie rendering settings to get a B->C clip that you can save. Then replace B with D and save the C->D movie by moving the lines in the D image. Put the clips into Norrkross Movie or another video editing application (eg iMovie, QuickTime Pro or Final Cut) you'll get the full A->B->C->D sequence.