That is how the game was made. Glide never supported above 1024x768 at least until Voodoo 3 and this game is from before then. I don't know exactly why it says Banshee. Voodoo Banshee was the second gen voodoo card with built in 2D support. Normal Voodoo cards were add in cards to give 3D capabilities to cards that didn't have it or that had poor 3D support. I actually had a Voodoo 2 SLI setup back in the day and SLI was what allowed me to get 1024x768. Otherwise 800x600 was the limit.
That was sort of the reason for the technical limitations at the time. Now for what to do about it today. The game uses the glide API and in order for Windows to work without a real 3dfx board you need a glide wrapper. The game comes with nglide in its folder. There is a file called nglide_config.exe. If you run this you can set the parameters the game runs by. Most importantly the resolution. An important note is that the game was made for 4:3 screens and in order to not have the image appear stretched you can choose 4:3 as the aspect ratio.
The version that comes with the game is a quite old one. If you want the newest one which among other things allows you to use the Vulcan API instead of Direct3D you can download it from http://www.zeus-software.com/downloads/nglide
. In order for the game to use it you can either delete nglide_config.exe, glide.dll, glide2x.dll and glide3x.dll from the game folder or copy the files of the same name from c:\Windows\SysWOW64 into the game library. If you delete the files you need to run nglide_config using the link in the nglide folder in the start menu. And the settings you set will work in all glide games you run on your system. If you copy the files to the game folder you run the nglide_config.exe in the game folder and the settings will only apply to Powerslide. This is useful if for example you have game that behave differently to using widescreen resolutions. By the way the resolution set using nglide_config overrides the resolution set in the game.
A quick note. On my computer the game goes to a low resolution before exiting the level if I don't set it to Vulcan. So I need the new nglide version to run the game. Your mileage may vary. Another option is to use another Glide Wrapper like dgvoodoo instead. Personally I find nGlide a little easier to use (meaning that I actually understand what all the options mean) so I tend to prefer that one.