For some reason, scaling doesn’t work properly in Windows 7, at least not for Nvidia cards (dunno if ATI works). So either you will get no actual resolution change with massive black borders (scaling disabled), or you will get a full screen picture which will make the picture look very stretched if you’re using a widescreen LCD monitor as erogames aren’t made in widescreen format (full screen stretch)
It’s annoying as heck, and it’s the same in all version of Windows 7 and all Nvidia drivers. Hopefully it’ll get fixed in the future, but seeing as this has been a known issue since the very first Win 7 beta version, I’m not having high hopes it’ll get fixed anytime soon.