Resolution problems with MBP w/ Display w/ Lion.

So I have had an Optoma HD71 Projector for a few years (which I love). It get's 1080p when hooked up to my laptop. BUT...

Ever since I updated to 10.7, the best resolution my "display" options gives me is 1024 by 768. Ugh, this is awful, my games and movies look terrible now on my 73 inch screen, you can imagine how pixilated it gets.

I'd like to know two things...

What the **** is wrong with this? I'm finding in more than one way that this 10.7 interface isn't living up to my expectations as a mac operating system.

Also, is there some sort of third party display app like an nvidia app or something? I want my 1080p back!!!! Or something just as good....

Other notes:

-I'm using a 50ft VGA to VGA male to a MiniDisplay Adapter, just as I always have.

The game I'm playing is Galaxy On Fire 2 which supports all resoultions including 1080p, and all of the movies I have speak for themselves. My desktop buttons get super huge when I plug it into the projector, also (and this is when it is plugged into the projector with just the desktop/internet showing) and it won't let me change the resolution on the projector from the displays tab (the only thing it lets me change resolution on btw) to....

1600 x 1200

1600 x 900

1400 x 1050

1360 x 768

1280 x 1024

1280 x 960

1280 x 720

1152 x 8770

1152 x 864 AND the list goes on.

I was going to take a screen cap, but upon attaching the image it wouldn't even let me hit submit, what the **** is going on? I'm using Safari... nothing but problems since I switched from 10.6, should I go 10.8?

Doesn't make any sense to me, somebody help?