1. Most likely if it's a 19" LCD monitor, the max resolution is going to be 1280x1024. Concerning LCD's, you usually have to go to at least a 20" monitor before you can get the higher resolution.
2. The crashing is odd. I'm upping my rez to 1280 on an LCD and the games never looked better. No crashes nothing. Are you sure you did the modification properly? There are other things you have to do if you've got XP, at least that's what my instructions told me. I would go over the instructions again, of see if someone has a copy from the Community Manual, that's what I used.
3. I'm not getting the texture compression either, I would just double check you're not exceeding your monitor's resolution specs.
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