Hammerfall: I'm not sure if this how it is supposed to be or not but when I bump the resolution up to my monitor's native res, the playing screen is so small it's just not pleasant. Is this working as intended?
That is usually just the start screen, once you begin the game it should go full screen.
If you are referring to the small character sizes . . . they will get smaller at higher resolutions .. I play at a maximum of 1280 x 1024 for the best size and comfort. Try some of the lower res till you find one that is comfortable for you.
Edit: Might take a look at
this link as well, a post by DeathKnight who is a Larian developer.
Although it is in response to a netbook question I believe you will find it useful in custom resolutions settings on any system.
Edit 2: The attached image is a better explanation of the problem . . .=)