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The movies are 640x480, and the engine will scale even the "high-quality" movies down to 640x480 and back up again (making them basically useless). Any resolution that's not supported by your graphics driver simply will not run.
All you have to do is open your Nvidia control panel, go to "Change Resolution" and click on "customize". 640x480 will be at the bottom, under "PC". Check the box next to it and hit OK.
"Mind your wants, 'cause someone wants your mind." -George Clinton
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