It is pretty simple actually.
The various screen settings (standard, normal, widescreen....) just manipulate the field of view. They have nothing to do with resolution.
The proper way to set it up for a wide screen monitor is to first set the resolution to the native resolution the LCD monitor supports, then check the "Widescreen" option, which changes the field of view so it matches a monitor with a 16:10 aspect ratio, which is what most widescreen computer LCD monitors are.