Hi there - this resolution seems to be quite an old standard.
5:4 (1.25:1) 1280×1024 Common until the early 2000s.
See
https://en.wikipedia.org/wiki/Display_aspect_ratioA more modern standard is:
16:9 (1.78:1) 1366×768†, 1920×1080 The default aspect ratio for HDTV and modern computer displays.
I think the issue is that your aspect ratio is almost square (5:4 = 15:12), whereas Planetdance is designed for 16:9.
This would explain why your display is squashed horizontally. I think your only option is to see if you can alter the resolution of your graphics output to the more modern standard, or see if you can get a graphics card that will produce the required aspect ratio, preferably in 1920 x 1080. Note that you may also need to update your monitor.
I use a dual monitor set up - the image above is on the 1920 x 1080 screen. The attachment below is on the second monitor, which has the 1280 x 1024, and you will see the same issue as your screen. Unfortunately, given the resources we have available to maintain Planetdance, we cannot code for every possibility.
Ed