When I install and play the game, everything is stretched and distorted horizontally. I'm assuming this is
because we had square monitors back when the game came out. I'd really like the option to play it in the
original format, because it annoys the heck out of me with everything stretched way out horizontally.

Thanks for any ideas!

< I'd really like the option to play it in the original format, >

Than you should know how to do this in your video cards drivers, as well as in monitor settings. Games settings never do that things.
Go to video driver and find something about stretching\keep aspect ratio. Set "Keep".

Don't have D2 installed atm, but as far as I remember there were two options:
- in d2config application there was a checkbox that enabled/disabled stretching to fullscreen resoultion
- somewhere in the d2 game folder there was an .ini file in which you were able to manualy edit game's resolution (I remember that resoultions higher than 1280x760 didn't work for me).

Best way though would be just to use great third party patch from here: https://verokster.blogspot.com/2019/03/disciples-i-ii-gl-wrapper-patch.html
Just read the instructions!