The selectable resolutions don't match the full-screen display which is widescreen (16:9). Any way to get it into the proper 4:3 aspect ratio as all my soldiers look chonky.

I am offered 4:3 resolutions only, 800x600, ....

Edit: I'm afraid I misunderstood your point - sorry. My screen is 1600x900, too, and the game display fills the whole screen - which means the display has probably been stretched from 4:3 to 16:9. I don't know what to do about this.
My soldiers look "normal" to me - which is no objection to your view :-). They are quite small, and they "live" in a fantasy world, so I guess I simply don't expect them to have human proportions. And I haven't seen the game on a 4:3 monitor for many years, so I wouldn't notice a difference. Finally, I prefer the full-screen display over a 4:3 display with black borders on both sides of the monitor (and I wouldn't expect GOG to overhaul the whole graphics of the game to accommodate today's monitor formats).
Apologies again for misinterpreting your question.

I use these setting and it works great on Win 7:

How to get to this settings?

use dxcfg.exe in Warlords 3 folder

Good find - thanks!

Tried this and it works! Cheers! :D