spillblood: Confirmed. Somehow deleting the szhardware.ini locks the display resolution to 640*480. Options can be changed in the option menu, but changes aren't kept. Setting other modes as nGlide also isn't possible, the game always jumps back to Glide when you click "Apply changes". Hope gog will fix these issues.
The game tries to autodetect available rendering modes and resolutions when it doesn't find a complete szHardware.ini file (I think this is done first run on the CD version of the game but it sounds like GOG distributes one with the game - probably because the nGlide renderer is much more likely to work correctly).
The autodetection might not work correctly on new hardware and operating systems, so resolution options you would normally have may be unavailable and options that don't work at all might appear.
In my case (CD version), "Primary" and "Secondary" renderer (Direct3d) modes work, but only in 16-bit colour - trying to select 32-bit colour results in the game reverting back to the last working resolution selection (attempting to force 32-bit colour by editing szHardware.ini has the same result).
Trying to select an 8-bit colour mode also reverts back to the last working resolution :P
EDIT: Just noticed something annoying (might not affect the GOG version): the crosshair becomes increasingly mis-aligned (down and to the right of where it should be) as you increase resolution above 640x480. This seems to affect both Direct3D and nGlide - but with nGlide you can avoid the issue by selecting 640x480 in-game and using the nGlide Configurator to make the game run at whatever resolution you want.
640x480 selected in menu 1024x768 selected in menu