My resolution is 800x600 when connected via VNC on the headless server, and i wanted to have a larger screen to view. The server is Karmic 9.10 and xorg.conf was empty, but i added all the lines you marked in red, and rebooted.
After it came online, the VNC connection wouldn't let me connect at all, so i ssh'd back to the server, and rm'd /etc/X11/xorg.conf, rebooted, and now it works again. So just adding those lines to that file didn't work for me. I'll be sticking with 800x600 for a bit until i find some other workaround or dedicate more time to it. For now though, ssh -x user@server works good enough.



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