1024x768 is a 4:3 resolution, so when you playback DVD's it'll be displayed as 4:3 with the larger borders (for a 4:3 display), so you need to configure it so when it displays in DVD playback the aspect is correct. At least I think it does, luckily my screen is 1920x1080 which is a wide screen resolution.
Why an 8600? Radeon HD's are a much better choice for HTPCs and very cheap.
No one really answered his original question about uscaling thoughPCs upscale with programs like VLC just as well as any player IMO.