I forgot that you can also set resolution with nglide_config.exe. To get that, you need to:
1. Download Glide from
http://www.zeus-software.com/downloads/nglide 2. Install it.
3. Delete the glide*.dll files from your Outlaws folder (to force the game to use the newer versions of those files that you installed to your system.
4. Run the nGlide config program from the Start Menu OR copy nglide_config.exe from where it was installed (C:\Windows\SysWow64 or C:\Windows\System32 for 64-bit or 32-bit Windows, respectively) to your Outlaws folder and run it from there.
In that utility, I always simply set the resolution to Desktop, but you can try that or all kinds of specific resolutions. I'm not sure that it'll make a difference for your particular problem, but it's worth trying (and you should definitely upgrade nGlide to the newest version, anyways).