I can answer all your questions.
First, I do product photography (of beads at www.purebeads.com
). I use Paint Shop Pro 10 to edit the photos. PSP is still being made to fit on an 800 x 600 screen. Photoshop and Photoshop Elements are not. I have found that when I edit photos at 800 x 600, I can see the imperfections much better because the pixels are larger. Then, when the photos are viewed at 1024 x 768 or higher, they look all the more perfect. In other words, if I can get the photos looking good at the lower resolution, they look great at high resolutions.
Once I edited a photo at 1024 x 768. Editing a product photo involves: selecting the best shot out of about ten, removing any color cast, cropping the edges, lightening the photo, adding contrast, decreasing color saturation (which increases with the previous two steps), shrinking the photo, sharpening it, and then adding text. The photo that I edited at 1024 x 768 was a little blurry right out of the camera (at that time I was using a much poorer camera), and when I looked at it at 800 x 600 it was totally unacceptable. I redid it at 800 x 600 and got a much more satisfying result, and have edited all photos at the lower resolution ever since.
(If you go to my site, you'll find plenty of lousy pictures, but most of those are older; I get better as time passes. I should also say that I'm not an absolute perfectionist, so occasionally a mediocre photo slips through.)
Second, I have repeatedly switched my screen resolution to 1024 x 768 and tried to get used to it (I have a 17" CRT), and in every case I had to switch back. The fonts are just too small and my eyes are much more comfortable at 800 x 600. I frankly don't know how everyone can run their computers at such high resolutions and work comfortably; I certainly can't (and there's nothing wrong with my vision). My CRT is truly excellent, and I feel very fortunate to have bought such a good one (made my Philips) before manufacturers started to phase them out. When I have considered buying an LCD, I always give up because all of them have ridiculously high "native" resolutions.
Getting back to photos, viewing them at 100% on an 800 x 600 screen reveals all the defects very well. Because of that, I've become what you might call a "pixel peeper" who is very critical of the image quality coming out of most digital cameras. That's why I am so excited about, and keep talking about, the Sigma DP1 camera that will be coming out soon -- it's photos pass the "low-resolution test".
On my computer I have two desktops, one set at 800 x 600 and one set at 1024 x 768. I just sent this editing window to the high-resolution desktop. These letters that I am typing are now uncomfortably small for me -- what was normal-sized print has turned into fine print. Why would I want to work with fine print all day? As I said, I don't know how people do it.