Reading the Virtual Server 2005 R2 SP1 readme, I came across this:
New VMRC client option to enable video stretch in full screen mode
A new command-line option -fullscreenstretch has been added to the VMRC client. With this option, the console opens in full screen mode and the display is stretched and/or resized to the fill the entire screen.
Unfortunately there are a couple of things wrong with this section. The first one is that the command line option is actually -stretchfullscreen not -fullscreenstretch. The second thing is that this only ‘stretches’ the display to 640 x 480 when it would normally be 640 x 400 (per discussion in this post) – all other resolutions are left alone.