[I-Chan]

Try disabling psx aspect ratio and enabling texwin pixel shader. You should try also lowering offscreen drawing to 1 and framebuffer effects to 2.

 

[I-Chan]

Well, your tv display isnt going to use anything higher than that fully, so yes, it's probably the best. It's really weird that you are having a slowdown lowering the resolution. Maybe you should try updating your card drivers, or if they are the latest, try a previous set, maybe the one you are using has a problem with that particular resolution.