Yeah, it's because you have switchres enabled. This means Windows will try whatever default resolution it's capable of - in this case probly 400x300, or maybe 640x480, depending on the game. TheManuel was trying to get native-like resolutions, but since it wasn't straight RGB, I don't know if it really was viable.
D3D still stretches, but by floating point precision, whereas DD is by integer values. I haven't tried a tv yet, but especially if using S-video, I'd guess just use D3D for all games, and depending on the game set the 'prescale' to 1 or higher. I've found with my 27" multisync monitors that since the dot pitch is different than a standard 19" arcade monitor, I prefer games at prescale=1, regardless of using DD or D3D. 27" SD TVs will have similar, or larger, dot pitch to my monitors hence I'd bet prescale=1 or more would be preferable.