Thanks for reporting. I believe this is an upstream bug with virtualbox.
I think there is a bug report up there as well. I have run into this
before and think the problem is that x or the guest additions do not
specify the virtualbox graphics driver. Try this.
1)edit xorg.conf with nano or another text editor
'sudo nano /etc/X11/xorg.conf'
2)go down to the section "Device" and add Driver "vboxvideo" so it looks
like this
Section "Device"
Identifier "Configured Video Device"
Driver "vboxvideo"
EndSection
3) restart the virtualbox guest machine
This should allow the resolution to be high and allow the autoresize feature of
the guest additions.
you can also look at this discussion of the issue
http://ubuntuforums.org/showthread.php?t=926408
I am going to close the bug, however if you problem is not fixed please
reopen it. And attempt to explain where I misread the bug.
good luck
--
Screen resolution in Virtualbox cannot be higher than 800 x 600
https://bugs.launchpad.net/bugs/283767
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