I guess you have a wide screen. I think your problem is the display driver and to set the right resolution. I have a Dell 2007WFP and the display driver is set to 1680x1050 pixels. My graphic card is a GeForce 7950 GX2 and have no problems with streched images or fonts. Remember, with wide screen you can not set ordinary 4/3 proportions like 1024x768 or similar.
BTW, pressing Auto button on the monitor would not solve the problem. The resolution is up to the graphic card and the monitor does not have any communication with the card, so it can not set the resolution. Also, not every card can give you the optimal resolution, so it is not always a good idea to buy a large screen if it does not match the graphic card. Also, to be able to select the right resolution, you may need the correct display drives. Windows must recognise the screen, not just showing "General Plug and Play display" or something similar in the properties. In my case the properties shows: Dell 2007WFP (Digital) on NVIDIA GeForce 7950 GX2. Yours should look similar but should show your grapic card and display name. The salesman should have told you about the graphic requirements when you bought the screen. I hope you can solve the problem, I wish you good luck.
And yes, photos that are used as background should be cropped for wide screen proportion, else they will look streched. That is only valid for the desktop background picture. Using any tool to show pictures is not a problem but some part of the screen is unused in that case. Very useful during editing, because that gives you plenty of space for tools and still have a large picture. This is especially true for us, 4/3 camera users.