Analogue VGA signal is still ok at 1600 x 1200 but not ideal. You definitely want DVI, you can tell the difference on a modern LCD.
The 4:3 aspect ratio is something of a retro must have feature. The thing is that many aren't aware of this and hence when you look at YouTube you find 95% of DOSBox videos in widescreen because of the way DOSBox captures in 320 x 200 without aspect ratio correction 😀
1280 x 1024 is 5:4 but IMO the difference is not THAT massive. In most games the HUD gets horizontally compressed a little but the effect is quite subtle. You can however still to this day buy brand new 1280 x 1024 monitors with low refresh rates and LED back light for reasonable money.
The ultimate IMO are 1920 x 1200 monitors. I got a Samsung 24" specifically for retro gaming. It wasn't cheap as they only make business models with this resolution. But it runs 1600 x 1200 games well via VGA or DVI with DVI looking absolutely stunning. I'm currently playing Splinter Cell Pandora Tomorrow on a 7800 GTX at 1600 x 1200 and it's a real treat.
It's funny how modern game consoles and also PC games struggle to run at 1080p60 and in 2005 you had games running 1200p60 no problem 😀
There is one more method of getting 1024 x 768 native resolution: Widescreen monitors and 4:3 aspect ratio compatibility thread
Get a new 18.5" monitor with 1366 x 768 resolution. I got a Philips and it has a 4:3 aspect ratio button. It does all DOS and Windows 4:3 resolutions without a hitch. However this particular monitor has really poor backlight, similar to the cheapest notebooks. The other issue is the size or lack off. It's a tiny screen with 18.5" on a 16:9 form factor. Works ok if you put the screen up close but you're better off playing with a 1:1 pixel 1024 x 768 screen on a nice 24".
Looking at all of the options, I find that going with a new 1280 x 1024 monitor is a very good option. While the aspect ratio is off, it's not that noticeable and many games actually support it properly. The alternative is to just scale 1024 x 768 footage but that resolution is lacking pixels and doesn't look very sharp on a large screen.
But I do have a question for people with huge CRT screens. Many support higher resolutions than 1600 x 1200. But do games support it too?
So what I'm asking is do games offer higher 4:3 resolutions when you use a monitor than can do more than 1200p?