Comment 20 for bug 188792

You monitor does not specify a preferred mode so the server ends up picking one. Also as Julien noted the driver is using the sync ranges from the monitor section of your config which may influence that decision. 1280x960 is a valid mode based on the sync ranges provided and it's actually 4:3 whereas 1280x1024 is not. I suppose it comes down to what mode do you pick as a default on an analog monitor which does not specify a preferred mode. You can use the preferred mode option in your monitor section to hardcode your preferred mode if you don't like what the xserver picks.

As to the display sizes, both come from the monitor via the EDID:
- Max image size supported by the monitor:
(II) RADEON(0): Max Image Size [cm]: horiz.: 32 vert.: 24
- The extended timings can individually specify an image sizes:
(II) RADEON(0): clock: 40.5 MHz Image Size: 310 x 230 mm
(II) RADEON(0): clock: 56.2 MHz Image Size: 310 x 230 mm