Played Betrayal ages ago, so this is specifically about Return to Krondor, which I've never played before.

Dang, this is ugly looking! And I know it got less to do with the technology at the time, and more to do with modern 16:9 monitors. Is there any emulator in existence that can run this game appropriately?

It isn't really an emulator you are looking for, that would just recreate an environment it could run in. You are looking for a source port. Sorry to be pedantic, but a source port is how you get better graphics or improved controls.

The only one even close was/is xBaK. Last updated in 2010, it was a source port of Betrayal for Linux only. Otherwise, maybe someone can suggest some Dosbox config hacks? That is outside my realm.