Hi, I have a 42″ tv and run at 720p. See here for configuring the resolution of Emulation Station: https://github.com/Aloshi/EmulationStation/issues/55
See here for configuring the video output of the Pi to match via /boot/config.txt: http://elinux.org/RPiconfig#Video
I think when you say video is ‘stretched’ you mean the aspect ratio is not correct? You could stop the runcommand script from changing the resolution down to VGA when emulators are started by editing es_systems.cfg:
Locate the emulator you wish to modify and change the runcommand.sh start type from 1 to 2. For example, in the Playstation section you need to change this line:
This will keep the aspect ratio equivalent to the display resolution. There may be a slight performance hit by running at a higher resolution. I have tried emulators at VGA and 720p and haven’t noticed any difference myself.