When you scroll to emulate a bigger resolution, that's called virtual resolution. That's a way of emulating higher resolutions. The only ways to emulate the lower resolutions are:
[*]Cropping/centering
[*]Scaling
The virtual resolution ("scrolling") depends on your graphics driver, not the LCD. You cannot display more than the native resolution on an LCD, and you can't display less than it. Other resolutions like 1024x768 are digitally scaled (unlike CRTs which are analog scaled). This digital scaling almost always produces a worse picture than its analog counterpart. When you switch to "1024x768" on a 1280x1024 LCD by scaling, the picture will be a little blurry and jagged.
CRTs have a finite number of dots (determined by dot pitch and size), it's just that the interpolation/blending is a lot better ("Gaussian").