Interesting. Last week I bought an LG Ultrawide 34" monitor to replace 2 x standard widescreen monitors to run with my Microsoft Surface 8 running Windows 11. I plugged in the new monitor into the Surface loading dock and then went to set screen resolution. Exact same problem as you had!! Windows did not offer any resolution better than 1950 x 1080 when I tried to set resolution for the external ultrawide monitor. Tried everything - watched useless "help" videos on LG and Windows support, read pages and pages of forum support articles, and even had a soul-destroying and completely unsatisfactory experience with LG's online chat system (seriously, it was worse than useless - at one stage actually gave me instructions for an LG washing machine....). Then, on a hunch I got a USB C to HDMI adapter, plugged it directly into one of the two USB C ports on the Surface itself (NOT the docking station), then went to monitor settings. To my complete surprise a whole new range of resolution options came up in Windows for the external ultrawide monitor, including the correct 2560 x 1080 option!! Selected that and BANG - everything is perfect!
I only tired this because when I had the monitor connected via the docking station, Windows did not offer these resolutions for the LG monitor BUT did offer them for the screen built into the Surface, so I knew the settings were there. Seemingly with the docking station or the Microsoft Mini monitor port cable (which converted to HDMI to connect to the monitor) prevents these extra resolution options from being displayed.
It cannot be possible that I am the only one to discover this, but in my case - and after a very frustrating few days - the situation is resolved.
A bonus is that I can now use the LG monitor driver too, which gives many different screen split options.