It's not a hardware problem. Games and their engines also have limits, hardware isn't the only concern.
I'm guessing the reason people could get 1600x1200 is because their monitor can support it. You cannot display a resolution higher than your monitor's native resolution, unless you're doing that fancy anti-aliasing mode where it then downsamples the resolution, but I doubt that would work with Dangerous Waters.
Also, they didn't program in anything other than 4:3 and 5:4 aspect ratios, so I don't believe anyone will be able to get widescreen ratios easily.
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