This reply solved my problem! As soon as I enabled DisplayPort 1.2 setting on the Dell U2414H display, my Surface Pro 7 can recognize it and use the desired 1920 x 1080 resolution.
For those of you who curious about how to enable DisplayPort 1.2 setting on the display I watched this video
to find out how (press 3rd button from the left to access the on-display menu). Also this manual (page 33) shows well how to use these buttons.
Glad I don't need to try rolling back the Intel graphic driver or buying another USB-C display cable. Note that I did finish the two things mentioned in page 1 of this thread (clear cache and update firmware of the docking station). Had no luck but not sure if those eventually work in conjunction with the DisplayPort 1.2 setting.
Thank you Ethan Chen and good luck everyone!