yes, the crt doesnt support it, so the res doesnt show up atm.
about all (relatively) recent cards can go to 2048x1600 (or so) resolution, so you should be able to do so too.
on a sidenote, not using the native resolution on a LCD will make the screen appear blurry, so yea, its the best to use it.
as for the size.. if its too smal, you can always put up the dpi a bit in the monitor setup, that will make things bigger too.