To use modern high resolutions and proper widescreen support, you'll have to patch the game with community mods. Otherwise the game looks zoomed. KeeperFX works pretty well (see this thread).

That aside, here are some tweaks for your vanilla DOSBox configuration:
Open dosboxDK.conf in your game's installation folder with any text editor and set the following:

fullscreen=true
fullresolution=1280x800
(try different resolutions here, whatever looks good on your system, but I wouldn't go too high)

output=opengl

aspect=false

If you don't care about blur, setting another scaler can improve the picture further (but also demands more resources). Try:
scaler=hq2x

Possible values are: none, normal2x, normal3x, advmame2x, advmame3x, advinterp2x, advinterp3x, hq2x, hq3x, 2xsai, super2xsai, supereagle, tv2x, tv3x, rgb2x, rgb3x, scan2x, scan3x.
They look like this: http://www.dosbox.com/wiki/Scaler

cycles=max
To counter your lags.