It looks like this isn't true any more, surprisingly enough. These guys are pretty awesome for still having a web site after all these years, though it's not entirely up-to-date. The official site, freedomfans.com, has several defunct links to "the latest patch" v1.2, however they had also created a 1.3 patch to "fix a problem where the game would not run successfully under Windows XP Service Pack 2." I needed that patch to get this game to run at all, and after installing it, much to my surprise, it allowed me to select 1920x1080x32 as a resolution, too. Graphics look as blocky and weird as you'd expect from a 10 year old game, but squares look square and circles look round, so I don't think it's doing a stretching thing here.
The two sources I found for that patch were:
http://www.shacknews.com/file/6300/free ... a-patch-13http://www.worthdownloading.com/game.php?gid=1116