[GeoffR]

The space at the sides is because the aspect ratio of the cover image doesn't exactly match the aspect ratio of the screen.

For the cover in the book, it is up to the publisher to choose how to display the image. They can choose to preserve the aspect ratio, or stretch the image to fill the screen. You can change it by editing the book's CSS stylesheet and/or HTML cover page.

For the cover on the sleep screen, the firmware preserves the aspect ratio. But if you want to stretch the cover you can use Calibre to do that by customising the KoboTouch (or KoboTouchExtended?) driver options: Tick the "Upload covers" box, and untick the "Keep cover aspect ratio" box.

(Note that if you resend the book to the device -- or use the KoboUtilities plugin to upload the covers without resending the book -- after changing the cover options, you will probably need to reboot the device before the new cover will show up.)