That's just the way interface elements work, at least with all the software I've used.
Outside of items like certain palettes which are expandable, the interface elements are a designed to be a fixed size. For example, say the Toolbox is built to be fixed at 60 pixels wide. By raising the resolution of your monitor display you are, in effect, squeezing that fixed number of pixels into a smaller physical dimension as seen on screen.
Not to sound mean, but if the 1280 X 1024 resolution is what you want, but are having a difficult time using, it sounds like you need better glasses, a larger monitor or an additional monitor just for your palettes.