Your video card also plays a part.
You might have a more pleasant result if you select High Colour in the display settings. If you use less than this, various shades will look blocky or patchy.
My 17" TFT monitor uses 1280 by 1024 resolution which in some ways is a bit much (not all the slightly smaller numbers are stable on mine!), but as Lozzy says its a matter of taste.