Your large monitor will just stretch the pixels at full screen and make the games look blockier and worse.
The old standard definition Television was only 640x480 (480p). So your monitor brand new widescreen monitor using 1680x1050 is going to make the game look worse, not better. If you want to make it look better, set it to windowed mode, and put it to 640x480 resolution.
It will be a small window on your big screen, but it will look better than at full screen. I personally play at 1024x768 because the larger window is worth the slightly worse graphics. 800x600 will probably be fine for you.
You could (should) also use the default "Nice" settings in the Pete's OpenGL2 or D3D plugins.