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Yes widescreen will be better.
1280x1024 (5:4) will look stretched to hell on a 16:9 monitor
5:4 was a fail attempt after 4:3 to create a new monitor standard, assuming that people will use computer just for computer work, and not for watching movies/videos. It sure had some quality advantages above the formerly most used 1024x768, but as monitor and TV standards/technologies started to slowly merge, 5:4 completly lost it's purprose. Widescreen was the way to go.
With the current prices, I don't see reason to buy anything lower as 1920x1080. Your GPU handles it easily, and if in new games you met some slowdown, you can set to a lower resolution in the same 16:9 aspect.
Sometimes a change is just nice makes things feel fresh.