Welcome CC.
I have a 22" screen also, with just a little horizontal stretch which I now don't even notice. It would help if you could post a screenshot so that we could see if yours is dramatically worse.
I notice you used the MS compatibility toolkit thingie. There was some discussion in earlier threads re hi-res fix about it and the upshot was that it wasn't necessary and you just needed the res fix, but the one called sh3_xpsp2_res_fix (I'm assuming you're running xp. See this thread which discussed it and has links.
http://www.subsim.com/radioroom/showthread.php?t=137348 . If you search using the words res resolution fix etc you should find some of the other threads which also discussed it.
I don't know that this will necessarily fix your problem, but have a look at these.