http://www.gamesas.com/bgsforums/index.php?showtopic=844046 with some info on DF's resolution. Basically the game is 320x200, and can't be rendered any higher than that (that i've heard of). so when you go fullscreen it will be pretty pixilated, but the proportions will look better.
you might need to adjust something in your DosBOX config file. below are these are the sections from my config file:
and here's some info on custom class creation: http://www.uesp.net/wiki/Daggerfall:ClassMaker
and there's also some of the same and other good info in the (in)famous daggerfall beginners guide http://tinyurl.com/a2dx6h
if you've read these and played a bit you can probably figure out how to make a really powerful character so i'd say learn at your own discretion.
i recommended the high elf because as a race they get immunity to paralysis which is pretty necessary if you run into spiders.
just as a note, I created my character as a high elf with critical weakness to paralysis, disease, and poison, with immunity to magic because disease and poison makes a magic check first before the poison and disease checks from what I've read. I've reached level 20 without ever having disease or poison. i can still get hurt pretty badly by ancient vampires & ancient lich's spells though.
fullscreen=falsefulldouble=falsefullresolution=originalwindowresolution=originaloutput=openglautolock=truesensitivity=100waitonerror=truepriority=higher,normalmapperfile=mapper.txtusescancodes=true
frameskip=1aspect=falsescaler=normal2x