Smokey, you'll only have small icons if your computer is outputting 1080p.
For best possible picture, you want to match the resolution output from your computer to the native resolution of the screen. But that's not always easy, depending on what type of video card your PC has. There is software that will allow you to customise the computer's resolution. However, if you're outptting a high resolution (1080p for example) youll need a good processor to keep up.
Basically, what you want (ideally) is a video card that will output 720 resolution (1280 by 720) and 1080 resolution (1920 by 1080).

My laptop has an Ati 9600 pro video card, and the screen's resolution is 1600 by 1050 (something like that), which isn't letterbox format nor is it widescreen, but it's closer to widescreen. It's one of the current standards for computer screens, actually called 16/10 format.
I have several resolution options, both letterbox (non-widescreen such as 1280 by 1024 resolution) and 16/10 resolutions such as 1280 by 768. Naturally, the 1600 by 1050 resolution looks best on the laptop screen, as it's the native resolution of the screen (no scaling has to be done). BUT, when I plug in my plasma using the 15 pin vga out, I only get a choice of letterbox resolutions, such as 800 by 600 and 1024 by 768. The latter doesnt look bad on the plasma, but as it's a letterbox format and not widescreen (which would be 1366 by 768), the image is stretched which means whatever appears on the screen (movies, icons..) looks squashed. I do have the option of adding black bars to the side to maintain the proper aspect ratio.
Sorry if this is confusing...