Star Wolves 3 - widescreen not working

[SharkD]

I just installed Star Wolves 3 and tried to set the resolution to 1080p like my LCD monitor. While the game did in fact fill the entire screen, the image looks squished horizontally. I mean, circles become ellipses and squares become flatter. Any idea on how to fix this? What I am currently doing is running the game at 1280 x 960 instead. But this leaves black bars/letterboxing around the image.

Thanks.