Blurry screen

I'm a recent refugee from Vista, running Workstation 2.2 build 2222 on a Ubuntu 7.10 host, with a Windows XP SP3 guest OS that I just set up a couple of days ago. I'm a bit crestfallen that Workstation isn't nearly as feature-full as Desktop 3.0, but I can live that, for a while anyway. Two questions though:

1) The screen seems to be scaled to about 90%, so it's uniformly blurry. How do I make it so that the guest OS is presented at the same resolution as the host OS?

2) The sound does not work. I get warning that audio failed, "loopback device will be used." Any suggestions on how I can diagnose this? I don't even know what to look for... guest OS drivers? Host OS device config?

Thanks in advance!