I can hit 1368x768 which is usable for most minor things, but I sometimes will plug it into a monitor to get the larger resolution.
I've been meaning to try Apple's Remote Desktop app but it hasn't been updated yet for Lion, there's a few more tricks than a standard VNC client as well.
You could also consider using a VNC client over Apple's. At least on Windows you can resize the remote desktop to fit the client but that won't change the screen resolution.