You should have no need to change your screen resolution. As Tony says, the 1024x768 is only the minimum required. The screen resolution should not affect the way PD operates or produces to any particular profile.
However, your screen resolution may/will affect the way your choice of player (in your example VLC) behaves and displays its output.
If you were to use another player, such as MPCHC, you would have a number of options easily available under View>Video Frame which include Touch window from inside/outside, overiding aspect ratio etc etc. Not to mention no frame or borders if you like your videos that way.
From your example, the black bars are a consequence of VLC displaying your output in a particular way, which you can alter (to some extent), either by resizing the display window or changing the options within VLC itself.
Cheers
Adrian
Life is really simple, but we insist on making it complicated. (see below)
Confucius
AMD Phenom IIX6 1055T, win10, 5 internal drives, 7 usb drives, struggling power supply.