How do you get Fallout 1 to run in its original aspect ratio on Windows 7? Currently the image is stretched and I'd prefer to play it in 4:3, assuming that was the original aspect ratio?

Try enabling windowed mode in sfall.
Double-click ddraw.ini and search for this:
[Graphics]
;Set to 0 for 8 bit fullscreen
;Set to 1 for 8 bit windowed
;Set to 4 for dx9 fullscreen
;Set to 5 for dx9 windowed
Mode=0

Thanks for the advice, but I was wondering what's the difference between 8 bit and dx9 and which would you recommend? Also I couldn't find a ddraw.ini only a ddraw.dll file, I'm assuming this is the correct file? Also would Microsoft word be an appropriate program to open the file with and when I open it with word which type of text encoding should I select; windows (default), MS-DOS or other encoding which has a drop down list of various options; including Western European DOS, IA5, ISO, and Windows.

There's not many differences between the two. Enable dx9 mode if you want to use some filters, or record videos in fraps. If you just want to play, 8 bit mode. In dx9, the image in movies is awful, in 8 bit is normal. No, this file is incorrect, you'll need ddraw.ini, which you can obtain in the link I posted (or search for sfall 1.18e). Give it a try. I like to use SciTE, but I don't think it's necessary in this case. Just edit and save.