VirtualBox

Amazing virtualization tool !

Setting resolution:
VBoxManage setextradata global GUI/MaxGuestResolution >width,height<

http://www.virtualbox.org/manual/ch09.html#id2547278

To start a headless server:
VBoxHeadless -startvm WinXP
rdesktop-vrdp -a 16 -N 127.0.0.1:3389

Mac-Client from Microsoft.

To control the VM's resolution:
VBoxManage controlvm WinXP setvideomodehint 1600 1024 16