I wasn't actually replying to you, but to the topic creator.
You are of course correct in the things you say, we are in essence arguing the same thing. This is simply an old game that relies primarily on the use of pre-rendered images. There are no resolution settings within the game, it runs on the one and only resolution it runs in. Therefore, there are really only two options here, both dealing with the way the GPU interprets the image for a significantly larger LCD. Either it can go 1:1 and display as a tiny box, but with the original sharpness. Or it can use a variety of stretching methods (stretching while keeping the aspect ratio, stretching to fit, etc.). Regardless, no amount of rescaling done by a GPU is going to make a game that is maybe possibly 640x look good on a 1920x resolution. Especially when we are talking about still images.
In short, StingingVelvet is right.
BmB: You misunderstood me Melgour. The point was that it probably looks ugly because the game's own resizing is bad. And that if he were to instead use the hardware rescaling of either his graphics card or display it would look nicer. With some good rescaling non-native resolutions on an LCD can look nice.
"Huge pixels" and "jaggies" sounds like pixel doubling to me. There are much better ways of upscaling an image.
http://en.wikipedia.org/wiki/Image_scaling Now, some blurriness as the result is inevitable, but this varies from method to method. And I can almost guarantee the rescaling of his card or display will be somewhat blurry compared to what can be done, though it's still a much better solution than having a tiny image or huge jaggies.
I'd wager the best result comes from GPU scaling. But you never know about displays, there may be surprises.