Its maximum resolution is 1024 x 768 but in order to be able to select that option you might have to reduce the number of colors. If you have it set to True Color (32 bit) it may not have enough screen memory for the high resolution. Try setting it to High Color (16 bit) and see if the 1024 x 768 option becomes available again. Seems odd though, it should have 16MB video ram which is more than enough for true color at that resolution.
If you want to change the font size (once you get the first issue sorted out), go to the display "Properties" dialog, "Settings" tab (where you changed the screen resolution) and click on the button "advanced". On the "General" tab you will find an option for setting the font size (small, large, other)
I hope Bobby has better insights on this