I edited the ini file for 1280x720 and it works! I kid you not! I am playing on a Samsung 50 inch DLP via a DVI to HDMI Monster cable. I am using a NVidia 6800 Ultra vid card with driver 71.80. In the game options, it will still say that I am only at 640x480. Hiowever, when playing the game, I press the display button for my tv and it does confirm that I am at 1280x720 at 60fps. I wasn't able to do this with the original KOTOR, it with the widescreen patches. It looks great! I know I can't be the only one.
I'm using a 6800 Ultra Extreme with the 71.80 drivers hooked up, via DVI, to my 50 inch Sagem DLP HDTV (1280x720) and no matter what I do to the ini file I cannot get widescreen.
Tried all thinkable variations of the graphics/display options. At "best" I manage to get a cropped version of the picture, but even so, that cropped picture is still 4:3.
Are you sure your TV is just not streching it?