I finally got it working!!!
I'm now running LinuxMCE 0710 beta, but this should work as well in 0704.
I never got this working in earlier Nvidia drivers.
I installed the latest Nvidia driver, found here:http://www.nvidia.com/object/linux_display_ia32_169.04.html
Just download the file and press CTRL+ALT+F1 and log in as root (linuxmce if you used the DVD like me)
Type the following.
sudo telinit 1
sudo sh NVIDIA-Linux-x86-169.04-pkg1.run
And follow the installation.
After reboot run the AVWizard by press and hold the shift button during start.
Select 1024x768 and complete the wizard.
After it boots edit the file /etc/X11/xorg.conf
You can do this in KDE if you like by typing this in a shell:
sudo kate /etc/X11/xorg.conf
In section Monitor remove all lines except Identifier and Option "DPMS"
In section Device set Option "useedid" "true"
In section Screen, change all 1024x768 to 1366x768
Save the file and reboot
After the reboot my Core started rebuilding and the GUI became 1366x768@66hz.
KDE also starts in 1366x768@66hz.