LCD Screens only work well at their native resolution. Anything else (higher or lower) and the quality suffers. Also, 1280x1024 is actually a 5:4 ratio while 1024x768 is a 4:3 screen ratio. You might want to see if there is a 1280x960 resolution option on it. It should look better on an LCD screen designed for a 4:3 ratio, although it won't necessarily improve digitizer accuracy. Native screen resolution is something you just have to deal with for an LCD screen. Unless the drivers are really well written there are going to be some issues even at the same screen ratio as native resolution.
I can't remember where I found this info. It might have been Toms Hardware, maybe somewhere else.