OK Mike, I checked this out.
First of all, before we go much farther, you should know that both Photoshop and Lightroom are "printer aware" when it comes to margins. Older printers and some newer models will not print with .25" borders at the top and bottom. They are both constrained to a minimum margin -- my old printer is .25" at the sides and .46" at the top and bottom, and so when I have PS or LR set to the old printer they won't let me "shrink" the margins.
However, my two photo printers accept more narrow margins, as well as full bleed printing, so when I select Print Settings or Page Setup at the bottom of the Print Panel and select one of those printers, the margins become more open to shrinking.
Now for the aspect ratio. First of all, I understand that CS4 has "content-aware scaling" which can do the "stretch" thing while trying to keep important subject matter from being distorted, but earlier versions of Photoshop didn't have it (you'd have to manually stretch an image) and neither does any version of LR.
So, since I'm "stuck" with CS3 I do it the "old fashioned way", meaning that if you have a non-native aspect ratio you will be cropped and lose some image no matter what.
Tyically for this kind of project I'd use the crop tool to set the aspect ratio to whatever I want/need, in your case to an 8x10.5 aspect ratio, which is easily done in either Photoshop or Lightroom by popping up the Aspect Ratio list (the double arrows next to the number-ratio designating the aspect ratio in the crop tool window. Choose Enter Custom and type in your numbers and hit OK and your image is automatically set to that AR -- you will notice that in this case the image will be cropped from the long dimension, can't be helped.
From there, crop for composition if you want/need to. Then, the question of resizing -- I personally don't bother with resizing for printing -- I typically only do it if I'm sizing for Web or email diplay. Do it if you wish, but it may do nothing for your printer. Printer software does resize as needed, and typically does a nice job.
From there, you'll move to print. Since you've done this in PS but can't do it in LR, and since I do almost all my printing in LR, we'll just get that running for you.
One thing I'll toss in here for fun: you can actually get the same results with a little more flexibility if you don't do the aspect ratio crop and just move to Print, as we shall see.
The first thing to check when you open the print module is that LR and your printer are on the same page re: margins. So, check your margins at the top of the Layout panel. By default they would likely be at .25, .25, .46, .46. To test this, click on one of the .46 numbers, type .25 and press Enter. If an error message comes up, you've got a problem, but if the change takes place, then just type that number into the next .46 and you are set.
Next, assuming the above worked, two things are needed: first, farther down the Layout panel you will see the Cell Size section. By default, it won't be correct, at least not as you'd wish, so you will change this: type the needed width and height of your image (in this case, the figures you entered for your aspect ratio, 8"x10.5", and things should look better. However if you did not crop to the proper aspect ratio, things will still be off, but in either case, at the top panel, Image Settings, click the Zoom to Fill Frame to have the picture adjust the zoom a bit where the crop and paper settings didn't match, but if you didn't do the AR crop, look below.
Now, if you didn't crop to the needed aspect ratio you'll find one bit of useful toolage: you can actually use your hand tool to move the image up and down or side by side, depending on the paper display orientation, to move the "cropping area" around and play with the composition a bit.
Well, then, that took a lot longer to say than to do! I hope this helps a bit!