In a recent blog entry, Don Park waxed poetic about 1600x1480 15" LCDs. That's more of a microfiche reader than an actual screen. High DPI displays, though, aren't the root of the problem. As Scoble points out, the real issue is Windows itself:
Good question. The “right” resolution is equal to the number of physical pixels (HxW) on the display. On some (most?) LCDs it is also the maximum supported resolution.