Well I've gone through the process of changing to 1680x1050 as described in the original post. It seems to have worked (no problem with the Media screen as mentioned by dopey).
One thing I noticed is that arrow indicators that come up when you scroll media lists are not fully showing. I don't remember this being the case before the change. Not sure whether it could be related to the ScaleX and ScaleY values. Part of my problem is that I am very new to LinuxMCE so I am not 100% sure what to expect and what the proper look and behaviour is
. For example, I've noticed that even after regenerating screens the overall proportions of menus to the screen remain the same. I am guessing that this is correct and is probably the whole point of regenerating?? It's just that it's different to say changing the resolution of the standard desktop where you get more screen real estate (GUI elements taking up less space proportionate to the screen) as you increase the resolution.
I've also noticed that menu labels that wrap over two lines tend to run over the boundaries of those menu items (buttons). Not sure if this is to do with my setup or a system limitation?
I am running a hybrid setup with a Viewsonic panel attached to it via DVI. It would be really nice if we had a definitive guide how to setup custom resolutions.