The stretch frame creates a boundary. If an object is in the stretch action's selection set and has some vertices within that boundary and some outside that boundary, then the vertices inside the boundary will be stretched while the vertices outside the boundary do not change. If an object is in the stretch action's selection set and has either no vertices within the window or all vertices within the window, it will be moved rather than stretched.
I believe the attached screencast shows how to get your block working the way you would like.