The easy answer: get a LCD tv, their cheap and you can easily read 1024 pixels from you couch.
If you really want to control certain (task specific?) windows applications, you might want to consider replacing the default windows shell with another windows shell. The default windows shell simply isn't built for less then 640x480 (task bar and such).
If you want media center functionality without XP MCE clean install, try mediaportal.
Of course, hopefully Vista's settings for changing the display DPI should hopefully help with this.