Short: FOP 0.20.5 was wrong. FOP 0.92beta is right. To get the same behaviour as in FOP 0.20.5, add content-height="scale-to-fit" and content-width="scale-to-fit". For all the details, please see the XSL-FO specification. See also examples/fo/images.fo for examples of different property combinations.
NOTE: This information needs to be added to the web site FAQ.
This 'task' has been completed. I've updated the FOP FAQ to include info about this: http://xmlgraphics.apache.org/fop/faq.html#scaling-graphics