Couple of points there, SXGA is 1280x1024 (SXGA+ is often 1400x1050). And if we're talking about the 8890, you cant get any screens lower than UXGA (not from PCTorque anyway, you could, but no longer).
It is normal for all TFTs. If you buy a 1600x1200 screen it has 1600x1200 actual physical pixels. If you want a lower res, 1280 pixels are stretched across 1600 physical pixels, which looks nasty, just as if you'd taken an SXGA image and stretched it out to UXGA in an image editing programme. Some TFTs do it better than others, the 16" UXGA does it pretty well, but none are as clear as native.
There are a couple of 'solutions', neither of them great:
1) Simple solution - run everything at UXGA or SVGA (800x600, an exact quarter of 1600x1200), both should look crystal clear. If UXGA is too much for you there are you can enlarge fonts, icons etc, some things will still be small.
2) Turn off image scaling, which stretches an image to fill the screen. This will physically use 1280x1024 pixels and leave the bordering pixels black, giving you black margins around the edges, but leaving you with a clear, unstretched image. This can be done in display properties (settings->advanced->displays->panel->panel attributes->uncheck the 'scale image' tickbox).
Be thankful you werent using TFTs in the olden days
, the few of them that made an attempt to scale the image did so horribly, duplicating adjacent pixels. (640x480 on an 800x600 screen was far from pretty).