iMac 27" - Lion - Dual Monitor on 23" screen, 1920x1080 (native) cuts off/letterboxes the 2nd monitor

I have a 27" iMac, with Lion. Dual monitor with a 23" monitor (I used to use it on my pc, 1920x1080 is native) however selecting 1920x1080 for the VGA display on my iMac, it cuts off the screen/letterboxes it on the right hand side. It doesn't do this for any other resoloution. What could the problem be?