The image is projected on the background sphere, the image proportion can be left 1 to 1 if the original is a square image, but a tall image might need to be 1 to 2 and a wide image 2 to 1 or 1.5 to 1.
I think your image needs roughly 2 to 1 for size settings.
So if you get distortion adjust with the x and y sizes.
You don't have to but if you select the type of projection to Position Center type, then also setting the image positions to x 0.5 y 0.5 moves the image so the center of the image is at the center of the camera projection.