Yes, Microsoft, this IS the issue. I let it update, it changed to 1024x768 again and said that's the recommended resolution for my monitor. Which it is NOT, which is why it is stretching and distorting everything.
I went into the display adapter properties, monitor tab, and clicked off the X for "Hide modes this monitor cannot display." It gave me a bunch of 4x3 resolutions (like 1920x1440) but not 16x9 resolutions for my 23" monitor including 1920x1080. OK, here's where I need the tech to direct me how to get my resolution to the real recommended setting.