as some have mentioned before, use tv-tool to adjust your tv output.
For watching videos/dvds, use 640x480 or enable 720x480 (dvd source is 720x480). Any more and your computer is just resizing your video anyway, and you're not really getting any more quality, and could be losing detail.
as far as I know, only the geforce mx cards support twinview. On GF2/3 it's just one or the other.
800x600 looks like blurry crap anyway, so don't worry about it, but I have noticed that I lose ~20pixels of video overlay on the right side during 800x600 vid playback. Don't know why.