I hear what you're saying, and I run my desktop at 1280x1024 also. SE:IV seems to be 'stretching' the 1024x768 image to fit the screen. For a test, view the image at it's intended size and see if it looks better, I suspect that the distortions are due to the strange way se4 displays the intro screen when running at higher than 1024x768 resolutions.
If, at it's original size it still looks god aweful to you, I'm the one to blame. sorry for the eyesore.
Cheers!
